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TALUAB1.C: BOOKIS, 

PUBLISHED BY 

GRIOG & ELLIOT, 

JVo. 9 JVortli Fourth Street, 

PHILADELPHIA. 



sjpijEjrnin IjIBK^r^ EniTiojvs. 

BYRON'S WORKS, complete in 1 vol. 8vo., including all his 

Suppressed and Attributed Poems. 

0;;^' This edition has been carefully comparod with the recent London edition of Mr, 
Murray, and made complete by the addition of more than fifty paixes of poems here- 
tofore unpublished in England. Among these there are a number that have never ap- 
peared in any American edition ; and the PubJishers believe they are warranted in say- 
ing, that this is the most complete edition of Lord Jiyron^s Poetical Works, ever 
published in the United States. 

COWPER AND THOMSON'S PROSE AND POETICAL 

WORKS, complete in 1 vol. 8vo., including two hundred and fifty Letters, and sundry 
Poems of Cowper, never before published in this country ; and of Thomson a new and 
interestmg Memoir, and upwards of twenty new poems, for the first time printed 
from his own Manuscripts, taken from a late edition of the Aldine Poets, now publish- 
ing in London. 

The distinguished Professor Silliman, speaking of this edition, observes, " I am as 
much gratified by the elegance and fine taste of your edition, as by the noble tribute of 
genius and moral excellence which these delightful authors have left for all future gene- 
rations ; and Cowper especially, is not less conspicuous as a true Christian moralist and 
teacher, than as a poet of great power and exquisite taste." 

GOLDSMITH'S ANIMATED NATURE, in 4 vols. 8vo., il- 

lustrated with eighty-five copperplates. 

• ^* Goldsmith can never be made obsolete, while delicate genius, exquisite feeling, 
fine invention, the most harmonious metre, and the happiest diction are at all valued. 

This is a work that should be in the library of every family, being written by one of 
the most talented authors in the English language. 

MILTON, YOUNG, GRAY, BEATTIE, AND COLLINS' 

POETICAL WORKS, complete in 1 vol. 8vo. 

THE WORKS OF LAURENCE STERNE, in 1 vol. 8vo. with 

a life of the author, written by himself. 

The beauties of this author are so well known, and his errors in style and expression 
so few and far between, that one reads with renewed delight his delicate turns, &c. 

THE POETICAL WORKS OF ROGERS, CAMPBELL, 

MONTGOMERY, LAMD, AND KIRK WHITE, complete in 1 vol. 8vo. 

THE POETICAL WORKS OF MRS. HEM AN S. Complete 

in 1 vol. 8vo. 

" As no work in the English language can be commended with more confidence, it will 
argue bad taste iu a female in this country to be without a complete edition of the writ- 
ings of one who was an honour to her sex and to humanity, and whose productions, 
from first to last, contains no syllable calculated to call a blush to the cheek of modesty 
and virtue. There is, moreover, in Mrs. Hemans' poetry a moral purity, and a religious 
feeling, which command it, in an especial manner, to the discriminating reader. No 
parent or guardian will be under the necessity of imposing restrictions with regard to 
the froe perusal of every production eHftinating from this gifted woman. There breathes 



throughout the whole a most eminent exemption from impropriety of thought or diction ; 
and there is at times a pensiveness of tone, a winning sadness in her more serious 
compositions, which tells of a soul which has been lifted from the contemplation of ter- 
restrial things, to divine communings with beings of a purer world." 

HEBER, POLLOK AND CR ABBE'S POETICAL WORKS, 

complete in 1 vol, 8vo. 

" Among the beautiful, valuable, and interesting volumes which the enterprise and 
taste of our publishers have presented to the reading community, we have seldom met 
with one which we have more cordially greeted and can more confidently and satisfac- 
torily recommend, than that, embracing in a single, substantial, well bound, and hand- 
somely printed octavo, the poetical works of Bishop Heber, Robt. PoUok, and the Rev. Geo. 
Crabbe, What a constellation of poetic ardour, glowing piety, and intellectual bril- 
liancy ! Such writers require no eulogy. Theu- fame is established and universal. The 
subhmity, pathos, and piety, of all these writers, have given them a rank at once with 
the lovers of poetry and the friends of religion, unsurpassed perhaps by that of any 
other recent authors in our language. A more delightful addition could scarcely be made 
to the library of the gentleman or lady of taste and refinement. The prize poems, 
hymns, and miscellaneous writings of Bishop Heber, the ' Course.of Time' by Pollok, and 
the rich, various, and splendid productions of the Rev. Geo. Crabbe, are among the standard 
works, the classics of our language. To obtain and preserve them in one volume, 
cannot but be a desirable object to their admirers." And it is to be hoped it will be 
found in the library of every family. 

A writer in the Boston Traveller holds the following language with reference to these 
valuable editions : — 

Mr. Editor : I wish, without any idea of puffing, to say a word or two upon the 
I' Library of English Poets" that is now pubUshed at Philadelphia, by Grigg & Elliot ; it 
is certainly, taking into consideration the elegant manner in which it is printed, and the 
reasonable price at which it is afibrded to purchasers, the best edition of the modern Bri- 
tish Poets that has ever been pubUshed in this country. Each volume is an octavo of 
about 50G pages, double columns, stereotyped, and accompanied with fine engravings 
and biographical sketches, and most of them are reprinted from Galignani's French 
edition. As to its value we need only mention that it contains the entire works of By- 
ron, Keats, Cowper, Thomson, Burns, Milton, Young, Scott, Moore, Coleridge, Rogers, 
Campbell, Lamb, Hemans, Heber, Kirk White, Crabbe, the Miscellaneous Works 
of Goldsmith, and other martyrs of the lyre. The publisher is doing a great ser- 
vice^ by this publication, and his volumes are almost in as great demand as the 
fashionable novels of the day, and they deserve to be so, for they are certainly 
printed in a style superior to that in wliich we have before had the works of the English 
Poets. 

JOSEPHUS'S (FLAVIUS) WORKS. By the late William 

Whiston, A. M. From the last London edition, complete in 3 vols. 8vo, 

As a matter of course, every family in our country has a copy of the Holy Bible— 

and as the presumption Is, the greater portion often consult its pages, we take the liberty 

of saymg to all those that do, that the perusal of the writings of Joscphus Vill be found 

very interesting and instructing. 

All those who wish to possess a beautiful and correct copy of this invaluable work, 

would do well to purchase this edition. It is for sale at all the principal bookstores in 

the United States, by country merchants generally in the Southern and Western states, 

and at a very low price. 

BURDER'S VILLAGE SERMONS, or lOl plain and short 

Discourses on the principal doctrines of the Gospel ; intended for the use of families, 

Sunday schools, or companies assembled for religious instruction m country villages 

By George Burden To which is added, to each Sermon, a short Prayer, with some 
general prayers for families, schools, «&c. at the end of the work. Complete in one 
volume 8vo. 

These sermons, wMch are characterized by a beautiful simphcity, the entire absence 
of conti-oversy, and a true evangeUcal spirit, have gone through many and large editions, 
and been translated into several of the continental languages, " They have also been 



MISCELCASEOUS WORKS. 



the honoured means not only of converting many individuals, but also of introducin 
the gospel into districts, and' even into parish churches, where before it was compara"^ 
tivelj'^ unknown." 

" This work fully deserves the immortality it has attained." 

This is a fine Ubrary edition of this invaluable work, and when we say that it should 
be found in the possession of every family, we only reiterate the sentiments and sincere 
wishes of all who take a deep interest in the eternal welfare of mankind. 

BIGLAND'S NATURAL HISTORY OF ANIMALS, 12 co- 

loured plates. 

BIGLAND'S NATURAL HISTORY OF BIRDS, 12 coloured 

plates. 

PERSIA. A DESCRIPTION OF. By Shoberl, with 12 co- 

loured plates. 

These works are got up in a very superior style, and well deserve an introduction to 
the shelves of every family librarj^ as they are very interesting, and particularly adapted 
to the juvenile class of readers. 

A COMMENTARY ON THE EPISTLE TO THE ROMANS. 

Designed for the use of Students of the English Bible. By Charles Hodge, Professor 
of BibUcal Literature in the Theological Seminary at Princeton. 

This invaluable work is very highly spoken of and recommended, by those who are 
much distinguished for their literary attainments. 

THE IMPORTANCE OF FAMILY RELIGION: with a selec- 

tion of Hymns and Prayers, adapted to Family Worship, and Tables for the regular 
Reading of the Scriptures. By the Rev. S. G. Winchester, A. M. 

The subject is one of incalculable practical importance, and is treated in a masterly 
manner. It contains an able, elaborate and highly instructive Essay on the obligation, 
nature and importance of Family Religion ; and we hope, ere long, it will be found in 
the Library of every familj'. 

A very eminent Divine, and one who is ever industriously engaged in promoting the 
welfare and happiness of the human family, in speaking of this work, observes — 

" That every new work which is calculated to encourage and promote family religion 
is worthy of consideration, and should be welcomed as contributing to the energy of pub- 
lic morals, and to the good order and prosperity of society. Such a work is the one be- 
fore us. The preliminary essay unfolds the importance of the domestic constitution and 
urgently explains and enforces parental duty. It should be carefully read and seriously 
pondered by parents who design to make use of the book as an aid to family religion. 
The Prayers and Hymns are judiciously selected, and are printed in a large type with a 
I'eference to their being easily read by the head of a family in conducting its devotions. 
There are many who, through timidity or some natural defect, feel incompetent to ex- 
temporaneous prayer in the presence of otticrs ; to such we recommend a form, while at 
the same time we do not, as a general rule, believe it to be the best way to animate and 
express devotional ieeling. We have known some who, by the use of forms of prayer 
in the family, have succeeded in overcoming their oppressive timidity, and afterwards, 
without their aid, have directed the devotions of others in an edifying manner. Extem- 
poraneous prayer, when it can be offered to edification, is the best mode of addressing the 
throne of grace, but in other cases, forms of prayer may be used with great propriety." 

LECTURES ON SCRIPTURE FACTS AND PROPHECY. 

By W. B. CoUyer, D. D. In 1 vol. 8vo. A new edition of this distinguished author's 
works. Few persons will rise from the perusal of this book without acknowledging, 
that their thoughts and affections have been elevated by the fervent and pious eloquence 
of the writer. 

THE DAUGHTER'S OWN BOOK; Or Practical Hints from a 

Father to his Daughter. In 1 vol. 18mo. 



MISCELLiAXEOUS ll^ORKS. 



The publishers are very confident, from the great demand for this invaluable little 
jvork, that ere long it will be found in the library of every young lady. 

BENNET'S (Rev. John) LETTERS TO A YOUNG LADY, 

on a variety of subjects calculated to improve the heart, to form the manners, and en- 
lighten the understanding. " That our Daughters may bo as polished corners of the 
Temple." 

The publishers sincerely hope (^for the happiness of mankind) that a copy of this 
valuable little work will be found the companion of every young lady, as much of the 
happiness of every family depends on the proper cultivation of the female mind. 

CARPENTER'S NEW GUIDE. Being a complete Book of 

Lines, for Carpentry, Joinery, &c., in 1 vol. 4to. 

The Theory and Practice well explained, and fully exemplified on eighty-four copper- 
plates, including some observations, &c., on the strength of Timber ; by Peter Nichol- 
son. Tenth edition. This invaluable work superseded, on its first appearance, all 
existing works on the subject, and still retains its original celebrity. 

Every Carpenter in our country should possess a copy of this invaluable work. 

HIND'S POPULAR SYSTEM OF FARRIERY, taught on a 

new and easy plan, being a Treatise on all the diseases and accidents to which the Horse 
is Uable. With considerable additions and improvements, adapted particularly to this 
country, by Thomas M. Smith, Veterinary Surgeon, and member of the London Veteri- 
nary Medical Society, in 1 vol. 12mo. 

The publisher has received numerous flattering notices of the great practical value of 
this work. The distinguished editor of the American Farmer, speaking of the work, 
observes — " We cannot too highly recommend this book, and therefore advise every 
owner of a horse to obtain it." 

NEW SONG BOOK.— Grigg's Southern and Western Songster; 

being a choice collection of the most fashionable songs, many of which are original, in 

1 volume, 18 mo. 

Great care was taken in the selection to admit no song that contained, in the 

slightest degree, any indelicate or improper allusions — and with great propriety it may 

claim the title of " The Parlour Song Book or Songster." The immortal Shakspoare 

observes,-^ 

" The man that hath not music in himself. 
Nor is not moved with concord of sweet sounds, 
Is fit for treasons, stratagems, and spoils." 

Numerous flattering notices of this work have appeared, from time lo time, in the dif- 
ferent newspapers throughout the country. The following is from the pen of William 
Leggett, Esq., former editor of " The Critic," a gentleman highly distinguished for his 
literary attainments : 

"A handsome copy of this very popular collection of melodies is lying on our table. 
It differs from song books generally, as much in the taste and judgment which have 
been displayed in the selection, as in the neat style of its typography and binding. — 
There is scarcely a song, old or new, admired for any of the qualities which constitute 
a good one, whether for harmony of expression, spirit or tenderness of the thoughts, 
appositeness of imagery, and illustration or smartness of point, that is not to be found in 
this little voluine. Besides the numerous productions of the master spirits of the old 
world, it contains many sweet effusions from cis-atlantic poets ; and, indeed, some of 
these 'native wood noles wild,' to use the expression of the bard of paradise, are well 
entitled to a place «ven in a work which contains the melodious numbers of Campbell, 
Moore, and Byron, In this last edition of the Southern and Western Songster, the 
editor has availed himself of the enlargement of the size of the volume, to introduce 
the admired songs of the distinguished vocalists, Mrs. Knight, Miss Kelly, flie Miss 
Gillinghams, Miss Clara Fisher, Miss Rock, and others. The extensive and rapid sale 
which the previous editions of this Songster met with, has rendered its character so well 
known, that it can scarcely require commendations ; but if any of our readers are in 



MISCELLANEOUS WORKS- 



want of an extensive, judicious, and neat collection of Melodies, we can cheerfully re- 
commend the volume before us, as combining all those qualities." 

SAY'S POLITICAL ECONOMY. A Treatise on Political 

Economy, or the Production, Distribution, and Consumption of Wealth. By Jean 
Baptiste Say. Fifth American edition, with Additional Notes, by C. C. Biddle, Esq., 
in 1 vol. 8vo. 

The editor of the North American Review, speaking of Say, observes, that " he is 
the most popular, and perhaps the most able writer on Political Economy, since the tima 
of Smith." 

The distinguished biographer cf the author in noticing this work observes, " Happily 
for science he commenced that study which forms the basis of his admirable treatise on 
Political Economy, a work which not only improved under his hand with every succes 
sive edition, but has been translated into most of the European languages." 

This work has been introduced as a text book into the principal Universities and Col- 
leges of our country, as well as in Europe. 

It would be beneficial to our country if all those who are aspiring to office, were re- 
quired by their constituents to be conversant with the pages of Say. 

RUSH ON THE MIND. New fine edition, l volume, 8vo.— 

This work is valuable and highly interesting for intelligent readers of every profession 
it i.j replete with curious and acute remarks, both medical and metaphysical, and de 
serves particular praise for the terseness of its diction. 

RUSH ON THE HUMAN VOICE. Emhracing its Physiolo- 

gical History, together with a System of Principles, by which criticism in the art of 
Elocution may be rendered intelligible, and instruction definite and comprehensive. To 
which is added, a brief Analysis of Song and Recitative ; second edition, with additions. 
By James Rush, M. D. 

A DICTIONARY OF SELECT AND POPULAR QUOTA- 

TIONS, which are in daily use : taken fi-om the Latin, French, Greek, Spanish, and 
Italian languages ; together with a copious collection of Law maxims and Law terms ; 
translated into EngUsh, with illusfrations, historical and idiomatic. Siith American edi- 
tion, corrected with additions. 1 vol. 12mo. 

In preparmg this Sixth edition for the press, care has been taken to give the work a 
thorough revision, to correct some errors which had before escaped notice, and to insert 
many additional Quotations, Law maxims an<l Law terms. In this state it is offered to 
the public in the stereotype form. This little work should find its way into every Fa- 
mily Library. 

CONVERSATIONS ON CHEMISTRY; in which the Ele- 

ments of that Science are familiarly explained and illustrated by Experiments and En- 
gravings on wood. From the last London edition. In which all the late Discoveries 
and Improvements are brought up to the present time, by Dr. Thomas P. Jones. 

All preceptors who have a sincere desire to impart a correct knowledge of this im- 
portant science to their pupils, will please examine the present edition, as the correction 
of all the errors in the body of the work renders it very valuable. 

The eminent Professor Bigelow, of Ha.rvard University, in noticing this work ob- 
serves, " I am satisfied that it contains the fundamental principles and truths of that 
Science, expressed in a clear, intelligible, and interesting manner. The high character 
of the author, as a lecturer, and as a man of science, will, I doubt not, secure for the 
work the good opinion of the public, and cause its extensive adoption among Semina- 
ries and students." 

The learned Professor Siliman observes, that this edition is decidedly more valuable 
than any preceding one. 

CONVERSATIONS ON NATURAL PHILOSOPHY; in 

which the Elements of that Science are familiarly explained. Illustrated with plates. 
By the author of " Conversations on Chemistry," &c. With considerable additions, 
corrections, and improvements in the body of the work ; appropriate Questions, and a 
Glossary, By Dr. Thomas P. Jones. 

The correction of all the errors in the body of the work, renders this edition very 
valuable ; and all who understand the subject, consider it superior to any other in use. 



SENECA'S MORALS.— By way of abstract to which, is 
added, a Discourse under the title of an After-Thouglit, by Sir Roger L'Estrange, Knt. 
A new fine edition, in 1 vol. 18mo. 

A copy of this valuable little work should be found in every family library. 

MALTE-BRUN'S NEW and ELEGANT QUARTO ATLAS, 

exhibiting the five great divisions of the globe, Europe, Asia, Africa, America, and 
Oceanica, with their several empires, kingdoms, stales, territories, and other sub-divi- 
sions, corrected to the present time ; and containing forty maps, drawn and engraved 
particularly to illustrate the Universal Geography, by M. Malte-Brun. 

The Atlas is particularly adapted for Colleges, Academies, Schools, and private fami- 
lies. There is no work that ever was published in this country which has received more 
numerous and flattering recommendations. 

THE AMERICAN CHESTERFIELD; or "Youth's Guide to 

the Way to Wealtli, Honour, and Distinction," &c. 

" We most cordially recommend the American Chesterfield to general attention : but 
to young persons particularly, as one of the best works of the kind that has ever been 
published in this country. It cannot be too highly appreciated, nor its perusal be un- 
productive of satisfaction and usefulness." 

QUESTIONS ON THE EPISTLE TO THE ROMANS, de- 
signed for Bible Classes and Sunday Schools, by Charles Hodge, Pro. Theol. Semixiary, 
Princeton. 

THE PASTOR AT A SICK BED, AND AN AFFLICTED 

FAMILY'S COMPANION. This is a new work from the German, and is one among 
the most valuable and popular works of the day. In 1 vol. 12mo. 

HITCHCOCK'S NEW AND POPULAR METHOD OF 

TEACHING THE ART OF BOOK-KEEPING. In three parts. 

THE BRITISH PREACHER, consisting of Discourses by the 

most eminent living Divines in England, Scotland and Ireland, accompanied with pulpit 
sketches. To which are added, Scriptural illustrations ; and selections on the oflSce, du- 
ties and responsibilities of the Christian ministry. By the Rev. Wm. Suddards, Rector 
of Grace Church, Philadelphia. Vol. 1. 

This volume contains nearly sixty Sermons by the most distinguished ministers in the 
British empire. Professing to be " The British Preacher," and not a sectional or deno- 
minational preacher, it has admitted upon its pages the sermons of clergymen in the 
Episcopal, Presbyterian, Congregational, Methodist and Baptist Churches. It is adorn- 
ed with portraits (in Longacre's best style,) of Bishop Wilson of Calcutta ; Dr. Chal- 
mers of Edinburgh ; Dr. Raffles of Liverpool ; Robert Newton of Manchester ; and 
the late Robert Hall of Bristol, It will no doubt be interesting to the clergy and reli- 
gious community of the United States to become acquainted with so many ornaments 
of the British pulpit as this work offers to their notice. 

Should this volume meet with due encouragement, it will be succeeded by others of a 
similar character. 



Shakspeare, 2 vols. 8vo. 

Scott's Napoleon, 2 vols. 8vo. 

British Drama, 2 vols. 8vo. 

Jefferson's Works, 4 vols. 

Webster's Speeches, 2 vols. 

Tatler and Guardian, 1 vol. 

Butler's History of Kentucky, 1 vol. 8vo. 

Dictionary of Biography. By Davenport. 

1 vol. 8vo. 
Secret Debates in the Convention. 



Chalmer's Political Economy, 12mo. 
Plutarch's Lives, 1 vol. 8vo. 

Do. do. 4 vols. 12mo. 

American Revolution, 12mo. 
Goodrich's Universal Geography, 8vo. 
Mosheim's Church History, 2 vols. 8vo. 
Lord Nial ; or the Wizard's Grave. 
Rollin's Ancient History, 2 vols. 8vo. 
Wirts's Patrick Henry, 1 vol. 8vo. 
Nicholson's Operative Mechanic, 2 vis. 8vo. 



p 



MiSCELLrANEOUS WORKS- 



The Young Mother, 12n)o. 

The Bravo, by Cooper. 

The Pioneer, by do. 

Reid on Watch-making, 8vo. 

Coleridge's Friend. 

Hall's Sketches of the West. 

Mariner's Library, 1 vol. 8vo. 

Psalms and Hymns for the Episcopal 
Church, various sizes. 

The Spectator, 12 vols. 

Life of Talleyrand. 

Mrs. Royal's Works. 

Lowth's Lsaiah, 1 vol, 8vo. 

Miller's Letters to Presbyteriang. 

Young Cadet. 

Hudibras, 18mo. 

The Sailor Boy. 

The Life of Girard. 

Bouriene's Napoleon. 

Common Place Book of Romantic Tales, 

The Teacher's Guide. 

Godman's Rambles of a Naturalist. 

Encyclopedia Ameiicana, 13 vols. 

Porter on Sugar Cane. 

Leland on Revelation, 2 vols. 

Ganihl's Political Economy, 

Watson's Body of Divinity. 

Mrs. Trollope's Belgium. 

Macknight on the Epistles, 

Six Months in a House of Correctioa. 

Miller's Hymns. 

Tredgold on Rail-roads, 

Earle on do. do. 

Sandford and Morton. 

Memoir of F. P. Sullings, 18mo. 

Beecher on Intemperance. 

Memoir of Catharine Amanda Ogden. 

The Juvenile Polyanthus. 

Family Dyer and Scourer. 

Records of a Good Man's Life, 

Militiaman's Pocket Companion. 

Potter's Compend. 

Rifle Drill. 

American Gardener, by Fessenden. 

Groom's Oracle. 

The Prairie, by Cooper. 

The Sketch Book, by Irving. 

Tales of a Traveller, by do. 

Travelling Bachelor. 

La Fayette in America. 

Pocket Lawyer. 

Ventriloquism Explained. 

Pleasures of Hope by Campbell. 

Peter Wilkins. 

Weems on Duelling. 

The Statesman's Manual, by Coleridge. 

Charlotte Temple. 

Dreamer's Sure Guide. 

CiTorth American Indians. 

Flowers of Wit. 



Baron Munchausen. 

Hocus Pocus. 

Clarionet Preceptor. 

Fife ^ dof 

Fifer's Companion. 

Instrumental Director. 

Brown's Catechism. 

Merchant's Memorandum Book. 

Little Grammarian. 

Two Wealthy Farmers. 

Adventures of Capt. Smith of Kentucky. 

Life of Joseph, by M'Gowan. 
Narrative of Gen, Winchester's Defeat. 
The Fortune Teller, by Napoleon. 
Shorter Catechism, corrected by Brown. 
Essay on Duelling, by Weems. 
Hind's Farriery, very valuable. 
Adams' Roman Antiquities, Svo. 
Albums, fine paper, in a great variety of 

bindings, &c. 
Butler's Hudibras, 18mo. 
Brown's Philosophy of the Human Mind, 

2 vols, Svo. 
Brown's Dictionary of the Bible, Svo. 
British Spy. By Wirt, 18mo. 
Burke's Works, complete. 
Bickersteth on Prayer, 12mo, 
Bickersteth on the Lord's Supper. 
Butler's Analogy of Religion, 12mo, 
Baxter's Call to the Unconverted, 18mo, 
Brown's Concordance, 18mo, 
Bibles for Families, of all sizes and in a 
variety of bindings, at very low prices, 
with and without psalms and plates. 
Bracebridge Hall. By W. Irving, 2 vo- 
lumes, 12mo. 
Baxter's Saint's Rest, 18mo. 

Children of the Abbey, 3 vols, ISmo. 

Campbell's Poems, ISmo and 12mo. 

Chapman's Interest Tables, 4to. Very 
Useful. 

Common Prayer Books, in various bind- 
ings and sizes. 

Clerk's and Magistrate's Assistant and 
Form Book, l2mo. 

Crabbe's English Synonymes explained in 
alphabetical order. 

Confession of Faith of the Presbyterian 
Church, 18mo. 

Children's Coloured Toy Books, assorted 
sizes. 

Doddridge's Rise and Progress, 12mo. 
Don Quixotte, 4 vols. 18mo. 
Dick's Christian Philosopher, 12mo, 
Dick's Philosophy of a Future State, 12mo. 
Dick's Philosophy of Religion, 12mo. 
Domestic Duties, or Instructions to Mar- 
ried Ladies, I2mo. 
Dictionary of Popular Quotations, 12mo. 



M1SCEL.L.ANEOUS TVOBKS- 



Diamond Pocket Bibles, various editions 
and prices. 

Evangelical Catechisms, various kinds, 

Edgeworth's Moral Tales, 3 vols. 18mo. 

Episcopal Prayer-books, in plain and ele- 
gant bindings, different editions, with 
the New Hymns. 

Family Bibles of all descriptions, with and 
without the Psalms, Concordance, &c. 
&c., with plates, 4to. 

Federalist, on the New Constitution, 8vo. 

Flute Melodies, 4to., stitched. 

Flute Instructor, 4to., do. 

Fifer's Companion, 4to,, do. 

Gibbon's History of the Decline and Fall 
of the Roman Empire, new edition, in 4 
vols. 

Gillies' History of Ancient Greece, com- 
plete, in 1 vol. 8vo. 

Goldsmith's Histories of Rome and Greece 
improved by Grimshaw. 

Goldsmith's Vicar of 'V^akefield, IBmo. 

Gibson's Surveying, Svo. 

Good's Book of Nature, Svo. 

Hervey's Meditations, 18mo. 

History of England. By Hume, Smollett, 
and Bissett, 9 vols, new ed. 

Hannah More's Works, complete, 3 vo- 
lumes, 8vo. 

Hannam's Pulpit Assistant. 

Hunter's Sacred Biography, 1 vol. Svo. 

Jay's Family Prayers, 18mo. 

Jenk's Devotions, 12mo. 



Kent's (Chancellor) Commentaries, 3 vo- 
lumes, Svo. 

Knickerbocker's History of New-York, by 

W. Irving, 2 vols. 12mo. 
Life of General Marion. By Weems, 12mo. 
Life of General Washington. By Weems, 
12mo. 

Lcmpriere's Classical Dictionary, Svo. 

Law's Serious Call to a Devout and Holy 
Life, 12mo. 

Locke's Essays on the Human Understand- 
ing, Svo. 

Letter Writers, various editions. 

Methodist Hymn Books, various kinds and 
prices. 

Modern Europe, History of, by Russel, 3 
vols. Svo. 

Marshall's Life of Washington, 3 vols. Svo. 

Napoleon's Life. By Sir Walter Scott, 
various editions. 

Newton's Works, complete. 

Original Poems, ISmo. 

Paley's Evidences of Christianity, 12mo. 

Paley's Philosophy. 

Pollok's Course of Time, a Poem, in 10 
Books, ISmo. 

Pilot, Pioneer, and Prairie. By Cooper, 
12mo. 

Pocket Maps of the different States, for 
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Pocket Testaments, various editions and 
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A TREATISE 

ON 

POLITICAL ECONOMY; — ^j 

OR THE 

m 

PRODUCTION, DISTRIBUTION, AND CONSUMPTION 

OF 

WEALTH. 



BY JEAN-BAPTISTE SAY. 



TRANSLATED FROM THE FOURTH EDITION OF THE FRENCH, 

BY C. R. PRINSEP, M. A. . 

WITH NOTES BY THE TRANSLATOR. 



SIXTH AMERICAN EDITIOIT, 

CONTAINING A TRANSLATION OF THE INTHODUCTION, AND ADDITIONAL NOTES, 

BY CLEMENT C. BIDDLE, 

JIKMB£R OF THE AMERICAN PHILOSOPHICAL SOCIETY. 



GRIGG & ELLIOT, 9, NORTH FOURTH STREET. 

1834. 



m 



o 



Entered according to the act of congress, in the year 1834, by Grigg& Elliot, in the office of the 
clerk of the district court of the eastern district of Pennsylvania. 



;?''' ^.r GIFT 
^ ESTATE OF 
HHILLIAM C. RIVES 
XAPRILi 1940 



Philadelphia: 

T. K. Collins & Co., Printers, 

No. 6, George Street. 



"^ii 



ADVERTISEMENT 



THE AMERICAN EDITOR, 



TO THE SIXTH EDITION. 



^RHV 



A NEW edition of this translation of the popular treatise of M. Say- 
having been called for, the five previous American editions being 
entirely out of print, the editor has endeavoured to render the work 
more deserving of the favour it has received, by subjecting every part 
of it to a careful revision. As the translation of Mr. Prinsep was 
made in the year 1S21, from an earlier edition of the original 
treatise, namely, the fourth, which had not received the last correc- 
tions and improvements of the author, wherever an essential princi- 
ple had been involved in obscurity, or an error had crept in, which 
had been subsequently cleared up and removed, the American editor 
has, in this impression, reconciled the language of the text and notes 
to the fifth improved edition, published in 1S26, the last which M. 
Say lived to give to the world. It has not, however, been deemed 
necessary to extend these alterations in the translation any further 
than to the correction of such discrepancies and errors as are here 
alluded to; and the editor has not ventured to recast the translation, 
as given by Mr. Prinsep, merely with a view to accommodate its 
phraseology, in point of neatness of expression or diction, to the 
last touches of the author. The translation of Mr. Prinsep, the 
editor must again be permitted to observe, has been executed with 
sufficient fidelity, and with considerable spirit and elegance; and 
in his opinion it could not be much improved by even remoulding 
it after the last edition. The translation of the introduction, given 
by the present editor, has received various verbal corrections; and 
such alterations and additions as were introduced by the author into 
his fifth edition, will now be found translated. 

It is, moreover, proper to state, that at the suggestion of the 
American proprietors and publishers of this edition of the work, 
the French moneys, weights and measures, throughout the text and 
notes, have been converted into the current coins, weights and 
measures of the United States; when the context strictly required 
it by a rigorous reduction, and when merely assumed as a politico- 



IV ADVERTISEMENT. 

arithmetical illustration, by a simple approximation to a nearly 
equivalent quantity of our own coins, weights or measures. This 
has been done to render the work as extensively useful as possible, 
and will, no doubt, make the author's general principles and reason- 
ings more easily comprehended, as well as more readily remem- 
bered, by the American student of political economy. 

Many new notes, it will be seen, have been added by the Ameri- 
can editor, in further illustration or correction of those portions of 
the text which still required elucidation. The statistical data, now 
incorporated in these notes, have been brought down to the most 
recent period, both in this country and in Europe. No pains have 
been spared in getting access to authentic channels of information, 
and the American editor trusts that the present edition will be found 
much improved throughout. 

The death of M. Say took place, in Paris, during the third week 
of November 1832, on which occasion, according to the statements 
in the French journals, such funeral honours were paid to his me- 
mory as are due fo eminent personages, and Odilon-Barrot, de Sacy, 
de Laborde, Blanqui and Charles Dupin, his distinguished country- 
men and admirers, pronounced discourses at the interment in the 
cemetery of Pere Lachaise. 

The account of his decease, here subjoined, is taken from the 
London Political Examiner of the 25th of November 1832, and 
is from the pen of its able editor, Mr. Fonblanque, one of the most 
powerful political writers in England. Mr. Fonblanque, it appears, 
was the personal friend as well as the warm admirer of the genius 
and writings of M. Say, and was well qualified to appreciate his 
high intellectual endowments, his profound knowledge and political 
wisdom, his manly independence, his mild yet dignified consistency 
of character, and above all, his rare and shining private virtues. 
There hardly could be a more interesting and instructive task assign- 
ed to the philosophical biographer, than a faithful portraiture of the 
life and labours of this illustrious man, which were so ardently and 
efficiently devoted to the advancement of the happiness and pros- 
perity of his fellow men. Perhaps the writings of no authors, how- 
ever great their celebrity may be, are exerting a more powerful and 
enduring influence on the well being of the people of Europe and 
America, than those of Adam Smith and John Baptiste Say. 

"France. has this week lost another of her most distinguished 
writers and citizens, the celebrated political economist, M. Say. The 
invaluable branch of knowledge to which the greatest of his intel- 
lectual exertions were devoted, is indebted to him, amongst others, 
for those great and all-pervading truths which have elevated it to 
the rank of a science; and to him, far more than to any others, for 
its popularization and diffusion. Nor was M. Say a mere political 
economist; else had he been necessarily a bad one. He knew that 
a subject so ' immersed in matter,' (to use the fine expression of 
Lord Bacon) as a nation's prosperity, must be looked at on many 
sides, in order to be seen rightly even on one. M. Say was one of 



r^^ 



ADVERTISEMENT. V 

the most accomplished minds of his age and country. Though he 
had given his chief attention to one particular aspect of human affairs, 
all their aspects were interesting to him; not one was excluded from 
his survey. His private life was a model of the domestic virtues. 
From the time when, with Chamfort and Ginguene, he founded the 
Decade Philosophique, the first work which attempted to revive- 
literary and scientific pursuits during the storms of the French 
Revolution — alike when courted by Napoleon and when persecuted 
by him (he was expelled from the Tribunat for presuming to have 
an independent opinion); unchanged equally during the sixteen 
years of the Bourbons, and the two of Louis Philippe — he passed 
unsullied through all the trials and temptations which have left a 
stain on every man of feeble virtue among his conspicuous contem- 
poraries. He kept aloof from public life, but was the friend and 
trusted adviser of some of its brightest ornaments; and few have 
contributed more, though in a private station, to keep alive in the 
hearts and in the contemplation of men a lofty standard of public 
virtue. If this feeble testimony, from one not wholly unknown to 
him, should meet the eye of any one who loved him, may it, in 
so far as such things can, afford that comfort under the loss, which 
can be derived from the knowledge that others know and feel all 
its irreparableness!" 

C. C. B. 

Philadelphia, December, 1834. 



ADVERTISEMENT 



THE AMERICAN EDITOR, 



TO THE FIFTH EDITION. 



No work upon political economy, since the publication of Dr. 
Adam Smith's profound and original Inquiry into the Nature and 
Causes of the Wealth of Nations, has attracted such general attention 
and received such distinguished marks of approbation from competent 
judges, as the " Traite D'Economie Politique," of M. Say. It was 
first printed in Paris in the year 1803; and, subsequently, has passed 
through five large editions, that have received various corrections 
and improvements from the author. Translations of the work have 
been made into the German, Spanish, Italian, and other languages; 
and it has been adopted as a text-book in all the universities of the 
continent of Europe, in which this nevy but essential branch of lib- 
eral education is now taught. The four former American editions 
of this translation have also been introduced into many of the most 
respectable of our own seminaries of learning. 

It is unquestionably the most methodical, comprehensive, and 
best digested treatise on the elements of political economy, that has 
yet been presented to the world. It exhibits a clear and systemati- 
cal view of all the solid and important doctrines of this very exten- 
sive and difficult science, unfolded in their proper order and connex- 
ion. In the establishment of his principles, the author's reasonings, 
with but few exceptions, are logical and accurate, delivered with 
distinctness and perspicuity, and generally supported by the fullest 
and most satisfactory illustrations. A rigid adherence to the induc- 
tive method of investigation, in the prosecution of almost every 
part of his inquiry, has enabled M. Say to effect a nearly complete 
analysis of the numerous and complicated phenomena of wealth, 
and to enunciate and establish, with all the evidence of demonstra- 
tion, the simple and general laws on which its production, distribu- 
tion, and consumption depend. The few slight and inconsidera- 
ble errors into which the author has fallen, do not affect the general 
soundness and consistency of his text, although, it is true, they are 
blemishes that thus far darken and disfigure it. But these are of 



ADVERTISEMENT. vii 

rare occurrence, and the false conclusions involved in them may be 
easily detected and refuted by recurrence to the fundamental prin- 
ciples of the work, with which they manifestly are at variance, and 
contradict. 

The foundation of the science of political economy was firmly 
laid, and the only successful method of conducting our inquiries in 
it pointed out and exemplified by the illustrious author of the 
Wealth of Nations; a number of its leading doctrines were also 
developed and explained by other eminent writers on the conti- 
nent of Europe, who, about the same time, were engaged in inves- 
tigating the nature and causes of social riches. But neither the 
scientific genius and penetrating sagacity of the former, nor the 
profound acuteness and extensive research of many of the latter, 
enabled them to obtain a complete discovery of all the actual phe- 
nomena of wealth, and thus to effect an entire solution of the most 
abstruse and difficult problems in political economy; those, namely, 
which demonstrate the true theory of value and unfold the real 
sources of production. Aided, however, by the valuable materials 
collected and arranged by the labours of his distinguished predeces- 
sors, here referred to, and proceeding in the same'path, our author, 
with the closeness and minuteness of attention due to tliis impor- 
tant study, has succeeded in examining, under all their aspects, 
the general facts which the ground-work of the science presents, 
and by rejecting and excluding the accidental circumstances con- 
nected with them, has thus established its ultimate laws or princi- 
ples. 

Accordingly, by pursuing the inductive method of investigation, 
M. Say, in the most strict and philosophical manner, has deduced 
the true nature of value, traced up its origin, and presented a clear 
and accurate explanation of its theory. His definition of wealth, 
therefore, is more precise and correct than that of any of his pre- 
decessors in this inquir3^ The agency of human industry, which 
Dr. Adam Smith, not with the strictest propriety, denominated 
labour, the important operation of natural powers, especially land, 
and the functions of capital, as well as the relative services of these 
three instruments, and the modes in which they all concur in the 
business of production, were first distinctly and fully pointed out 
and illustrated by our author. In this way he successfully unfolded 
the manner in which production is carried on, and imparts value to 
the products of agriculture, manufactures, and commerce. By, also, 
distinguishing reproductive from unproductive consumption, M. 
Say has exhibited the exact nature of capital and its consequent im- 
portant agency in production, and thus has shown why economy is 
a source of national wealth. Such are this author's peculiar and 
original speculations, the fruits of deep and patient meditation on 
the phenomena observed. The elementary principles derived from 
them, with others previously ascertained, he has combined into one 
harmonious, consistent, and beautiful system. 
• But a few of these solid and well-established positions have been 



Viii ADVERTISEMENT. 

criticised and objected to as inconclusive and inadmissible, by 
Mr. Ricardo and by Mr. Malthus, two of the ablest and most dis- 
tinguished political economists among our author's contemporaries. 
Other doctrines in relation to the nature and origin of value have 
been advanced by them, and with so much plausibility too, that some 
of the most acute reasoners of the present day have not been suffi- 
ciently on their guard against the fallacies involved in them. The 
mathematical cast given to their reasonings by these writers, has 
captivated and led astray the understandings of intelligent and saga- 
cious readers, and induced them to adopt, as scientific truths, what, 
when properly investigated and analysed, are found to be merely 
specious hypotheses. Hence it is that a theory of value, purely 
gratuitous, has been extolled in one of the principal literary journals 
of Great Britain, as being " no less logical and conclusive than it 
was profound and important." Our author, accordingly, deemed it 
necessary to examine the arguments brought forward m support ot 
these views of his opponents, in order to test their soundness and 
accuracy, and to submit his own principles to a further review, that 
he might become satisfied that the conclusions he had deduced from 
them had not been in any manner invalidated. 

In the notes appended by M. Say to the French translation ot 
Mr. Ricardo's Principles of Political Economy and Taxation, the 
reader will find what the editor deems a masterly and conclusive 
refutation of the theoretical errors of this author. M. Say's strictures 
upon the twentieth chapter of the work, entitled, « Value and Riches, 
their Distinctive Properties," are in his opinion decisive and unan- 
swerable.- The fallacies contained in Mr. Ricardo's theory of value, 
which, the editor thinks, may be traced to an anxiety to give con- 
sistency to the loose and inaccurate proposition of Dr. Adam Smith, 
that exchangeable value is entirely derived from human labour, are 
there fully exposed, and his whole train of reasoning, in connexion 
with it, shown to rest upon an unwarrantable assumption. It must, 
however, be conceded that Mr. Ricardo was an intrepid and uncom- 
promising reasoner, who always proceeded in the most direct and 
fearless manner from his premises to the conclusion. But not unit- 
ing with the strongest powers of reasoning, a capacity for analytical 
subtilty, he sometimes did not perceive verbal ambiguities in the 
formation of his premises, and transitions in the signification of his 
terms in the conduct of his argument, which, in these instances, vi- 
tiated his conclusions. The fundamental errors into which he has 
fallen, accordingly, do not arise from any want of strictness m his 
deductions, but from undue generalizations and perversions of lan- 
guage In M. Say's Letters to Mr. Malthus, which have been 
translated by Mr. Richter, the points at issue between these two 
eminent pohtical economists are discussed in the most luminous, im- 
partial, and satisfactory manner; and by all candid and unprejudicec 
critics must be considered as bringing the controversy to a close. 

It is not his intention, nor would it be proper on this occasion 
for the editor to enter further into the merits of the controversy 



ADVERTISEMENT. ix 

writings of our author. Any dispassionate inquirer, who will take 
the pains carefully to review the whole ground in dispute, will, he 
thinks, find that the disquisitions referred to contain a triumphant 
vindication of such of the author's general principles as had heen 
assailed by his ingenious opponents. Whenever the study of the 
science of political economy shall be more generally cultivated as an 
essential branch of early education, most of the abstruse questions 
involved in the controversies which now divide the writers on this 
subject will be brought to a conclusion; the accession of useful know- 
ledge it will occasion will more effectually eradicate the prejudices 
which have given birth to these disputes and misconceptions, than 
any direct argumentative refutation. 

The great merits of this treatise on political economy are now be- 
ginning to be well known and properly estimated by that class of 
readers who take a deep interest in the progress of a science, which 
"aims at the improvement of society," as Dugald Stewart so 
truly remarks, " not by delineating plans of new constitutions, but 
by enlightening the policy of actual legislators;" a science, therefore, 
with the right understanding of whose prmciples, the welfare and 
happiness of mankind are intimately connected. 

In alluding to this admirable work of M. Say, Mr. Ricardo re- 
marks, " that its author not only was the first, or among the first, of 
continental writers, who justly appreciated and applied the princi- 
ples of Smith, and who has done more than all other continental 
writers taken together, to recommend the principles of that enlight- 
ened and beneficial system to the nations of Europe; but who has 
succeeded in placing the science in a more logical, and more instruc- 
tive order; and has enriched it by several discussions, original, ac- 
curate, and profound." 

The English public has for some time been in possession of the 
present excellent translation of this treatise by Mr. Prinsep; the 
first edition of which was published in London in the spring of 1821. 
It is executed with spirit, elegance, and general fidelity, and is a 
performance, in every respect, worthy of the original. It is here 
given to the American reader without any material alteration. 

In various notes which the English translator has thought proper 
to subjoin to his edition of the text, he has wasted much ingenuity 
m endeavouring to overthrow some of the author's leading princi- 
ples, which, notwithstanding these attacks, are as fixed and immutable 
as the truths which constitute their basis. Had Mr. Prinsep more 
thoroughly studied M. Say's profound theoretical views on the 
subject of value, and had he, also, made himself acquainted, which 
it no where appears that he has done, with the powerful and victo- 
rious defence of these doctrines, contained in the notes on Mr. 
Ricardo's work, and in the letters to Mr. Malthus, already referred 
to, he perhaps might have discovered, that they are the ultimate 
generalizations of facts, which, agreeably to the most legitimate rules 
of philosophising, the author was entitled to lay down as general 
laws or principles. At all events, Mr. Prinsep should not have 



ADVERTISEMENT, 



ventured upon an attack on these first principles of the science of 

political economy, without this previous examination. 

Such, therefore, of these notes of the English translator as are in 

opposition to the well-established elements of the science, and have 
no other support than the hypothesis of Mr. Ricardo and Mr. Mal- 
thus, have been entirely omitted; the American editor not deeming 
himself under any obligation to give currency to errors, which would 
perpetually interrrupt and distract the attention of the reader in a 
most abstruse and difficult inquiry. Other notes of the translator, 
which contain interesting and valuable illustrations of other general 
principles of the work, drawn from the actual state of Great Britain 
and her colonies, have been retained in this edition, as appropriate 
and useful. The translator's remarks on the pernicious character 
and tendency of the restrictive and prohibitive policy, are particu- 
larly worthy of regard, confirming, as they most fully do, on this 

' subject, all the important conclusions of the author. The folly of 
attempting, either by extraordinary encouragements, to attract 
towards some branches of production a larger share of capital and 
industry than would be naturally employed in them, or by uncom- 
mon restraints forcibly to divert from others a portion of the capital 
and industry that would otherwise be invested in them, is at least 
beginning to be understood. 

The restrictive system, or that which by means of legislative 
enactments endeavours to give a particular direction to national 
capital and industry, derived its whole support from the assumption 
of positions now generally admitted to be gratuitous and unfounded, 
namely, that in trade whatever is gained by one nation must neces- 
sarily be lost by another, that wealth consists exclusively of the 
precious metals, and consequently, that in all sales of commodities, 
the great object should be to obtain returns in gold and silver. In 
Europe these erroneous opinions have now, for some time, been 
relinquished by political economists of all the various schools, some " 
of whom yet difier and dispute respecting a few of the more recon- 
dite and ultimate elements of the science. In the whole range of ' 
inquiry in political economy, perhaps there is not a single proposi- 
tion better established, or one that has obtained a more universal sanc- 
tion from its enlightened cultivators in every country, than the 
liberal doctrine, that the most active, general, and profitable employ- 
ments are given to the industry and capital of every people, by 
allowing to their direction and application the most perfect freedom, 
compatible with the security of property. This fundamental posi- 
tion of political economy, and the various principles that flow from 
it as corollaries, were first systematically developed, explained, and 
taught by the great father of the science. Dr. Adam Smith; although 
glimpses of the same important truth had previously, and about the 
same time, reached the minds of a few eminent individuals in other 
parts of the world. " The most ejQfectual plan for advancing a people 
to greatness," says Dr. Smith, " is to maintain that order of things 
which nature pointed out; by allowing every man as long as he 



ADVERTISEMENT. XI 

observes the rules of justice, to pursue his own interest in his own 
way, and to bring both his industry and his capital into the freest 
competition with those of his fellow citizens." Animated by a 
like desire to promote the improvement and happiness of mankind, 
with that which actuated the author of the Wealth of Nations, the 
most profound inquirers among his successors embraced his enlarged 
and benevolent views, as the only certain means of increasing the ge- 
neral prosperity, and eloquently maintained and enforced them. The 
doctrines of the freedom of trade and the. rights of industry, were 
vindicated and taught by all the distinguished British political econo- 
mists; namely, by Dugald Stewart, Ricardo, Malthus, Torrens, Hor- 
ner, Huskisson, Lauderdale, Bentham, Mills, Craig, Lowe, Tooke, 
Senior, Bowring, M'Culloch, and Whatley; and, on the continent of 
Europe, by authors as celebrated, namely, by Say, Droz, Sismondi, 
Storch,Garnier,Destutt-Tracy,Ganilh,Jovellanos,Sartorius,Queypo, 
Leider, Von Schlozer, Kraus, Weber, MuUer, Scarbeck, Pechio, and 
Gioja. 

" Under a system of perfectly free commerce," says Mr. Ricardo, 
" each country naturally devotes its capital and labour to such em- 
ployments as are nnost beneficial to each. This pursuit of individual 
advantage is admirably connected with the universal good of the 
whole. By stimulating industry, by rewarding ingenuity, and by 
using most efficaciously the powers bestowed by nature, it distri- 
butes labour most efiectively and most economically: while by in- 
creasing the general mass of productions, it diffuses general benefit, 
and binds together by one common tie of interest and intercourse, 
the universal society of nations throughout the civilized world. It 
is this principle which determines that wine shall be made in France 
and Portugal, that corn shall be grown in America and Poland, and 
that hardware and other goods shall be manufactured in England." 

Our own celebrated countryman, Franklin, too, with a sagacity 
and force which always characterized his intellect, maintained and 
exemplified in his "Essay on the Principles of Trade," what he 
therein repeatedly called " the great principle of freedom in trade." 
Even before the appearance of the Wealth of Nations, he had with 
almost intuition anticipated some of the most profound conclusions 
of the science of political economy, which other inquirers had ar- 
rived at only after a patient and laborious analysis of its phenomena. 
The new and generous commercial policy is not more beholden 
for support and currency to the arguments and illustrations of any 
one of its early expositors, than to the clear and vigorous pen of the 
highly gifted American philosopher. " The expressions, Laissez 
nous f aire, 2XiApas trop gouvernerr which, to use the language of 
DuGALD Stewart, the highest of all authorities, " comprise in a 
few words two of the most important lessons of political wisdom, 
are indebted chiefly for their extensive circulation, to the short and 
luminous comments of Franklin, which had so extraordinary an 
influence on public opinion, both in the Old and New World." 
Nevertheless, strange as it may seem, by a perversion or miscon- 
ception of a few of his incidental opinions, the name of the first of 



Xll ADVERTISEMENT. 

practical statesmen has been invoked, and its authority employed 
among us, in aid of a system of restraints and prohibitions on com- 
merce, which it was the chief aim of his politico-economical writ- 
ings to refute and condemn, as alike repugnant to sound theory and 
destructive to national prosperity. Whenever American statesmen 
and legislators shall have as clear and steady perceptions as Franklin 
of the truth and wisdom of the doctrine of commercial freedom, we 
may expect that our national and state codes will no longer exhibit 
so many traces of that empirical spirit of tampering regulation which, 
instead of invigorating^nd quickening the development of national 
wealth, only cramps and retards its natural growth. " Where should 
we expect," says M. Say, in a letter to the editor, " sound doctrine 
to be better received than amongst a nation that supports and illus- 
trates the value of free principles, by the most striking examples. 
The old states of Europe are cankered with prejudices and bad 
habits; it is America who will teach them the height of prosperity 
which may be reached when governments follow the counsels of 
reason, and do not cost too much." 

The preliminary discourse has been translated by the American 
editor, and in his editions of the work restored to its place. The 
editor must confess that he is at a loss to account for the omission 
by the English translator of so material a part of the author's trea- 
tise as this introduction to his whole inquiry. In itself it is a per- 
formance of uncommon merit, has immediate reference to, and sheds 
much light over, the general views unfolded in the body of the 
work. The nature and object of the science of political economy, 
the only certain method of conducting any of our inquiries in it 
with success, and the causes which have hitherto so much retarded 
its advancement, are all considered and pointed out with great 
clearness and ability. The author has also connected with it a highly 
interesting and instructive historical sketch of the progress of this 
science during the last and present century, interspersed with nu- 
merous judicious and acute criticisms upon the writings and opin- 
ions of his predecessors. Moreover, this discourse, throughout 
every part, is deeply philosophical, and well calculated to prepare 
the reader for the study on which he is about to enter. The editor 
has, therefore, he trusts, performed an acceptable service in putting 
the American student in possession of so important a part of the 
original work.* 

* The following extract of a letter from M. Say, to the American editor, it 
may not be improper to subjoin, as it contains the author's opinion of the value 
he attaches to the preliminary discourse. 

" Your translation and restoration of the preliminary discourse adds, in my 
eyes, a new value to your edition. It could only have been from a narrow cal- 
culation of the English publisher, that it was omitted in Mr. Prinsep's transla- 
tion. Ought that portion of the work to be deemed unuseful, whose aim is to 
unfold the real object of the science, to present a rapid sketch of its history, and 
to point out the only true method of investigating it with success! Mr. George 
Pryme, professor of political economy in the university of Cambridge, in Eng- 
land, makes this very disicourse the principal topic of several of his first lectures." 



I 



ADVERTISEMENT. Xlll 

Notes have, also, been subjoined by the American editor, for the 
purpose of marking a few inconsiderable errors and inconsistencies 
into which the author has inadvertently fallen, and of supplying an 
occasional illustration, drawn from other authors, of such passages 
of the text as seemed to require further elucidation or correction. 

C. C. B. 

Philadelphia, April, 1833. 



CONTENTS. 

BOOK I. 

OF THE PROIDUCTION OF WEALTH. 



Advertisement by the American Editor, to the Sixth Edition 
Advertisement by the American Editor, to the Fifth Edition 
Introduction -------- 

Chap. I. Of what is to be understood by the term production 

II. Of the different kinds of industry, and the mode in which they 
concur in production - - - - - 

III. Of the nature of capital, and the mode in which it concurs in 

the business of production - - - 

IV. Of natural agents, that assist in the production of wealth, and 

specially of land ------ 

V. On the mode in which industry, capital, and natural agents 
unite in production - - - - . - 

VI. Of operations alike common to all branches of industry 
VII. Of the labour of mankind, of nature, and of machinery respect- 
ively ------- 

VIII. Of the advantages and disadvantages resulting from division 
of labour; and of the extent to which it may be carried 
IX. Of the different methods of employing commercial industry, and 

the mode in which they concur in prodiiction 
X. Of the transformations undergone by capital, in the progress of 

production' - - ' - 

XI. Of the formation and multiplication of capital 
XII. Of unproductive capital - - - - - 

XIII. Of immaterial products, or values consumed at the moment of 

production ------- 

XIV. Of the right of property - - - . - 
XV. Of the demand or market for products - - 

XVI. Of the benefits resulting from the quick circulation of money and 
commodities ------ 

XVII. Of the effect of government-regulations, intended to influence 
production . - 

Sect. 1. Effect of regulations prescribing the nature of the pro- 
ducts ------ 

Digression — Upon what is called the balance of trade 
3. Of the effect of regulations, fixing the manner of pro- 
duction - - - 

3. Of privileged trading companies _ . . 

4. Of regulations affecting the corn trade 



Page 

iii 

vi 

xvii 

65 



81 
83 

89 

94 

103 

109 
113 
122 

123 
131 
136 

144 

147 

147 
152 

179 
187 
193 



CONTENTS. XV 



Page 



XVIII. Of the effect upon national wealth, resulting from the product- 
ive efforts of public authority .... 203 
XIX. Of colonies and their products . . - . 207 
XX. Of temporary and permanent emigration, considered in refer- 
ence to national wealth .... - 217 
XXI. Of the nature and uses of money: 

Sect. 1. General remarks - ... - 221 

2. Of the material of money .... 224 

3. Of the accession of value a commodity receives, by 

being vested with the character of money - - 228 

4. Of the utility of coinage; and of the charge of its exe- 

cution ...... 232 

5. Of alterations of the standard-money - - 238 

6. Of the reason why money is neither a sign nor a mea- 

sure ...... 244 

7. Of a peculiarity, that should be attended to, in esti- 

mating the sums mentioned in history - - 252 

8. Of the absence of any fixed ratio of value between one 

metal and another .... - 258 

9. Of money as it ought to be - - - . 260 

10. Of a copper and brass metal coinage ... 265 

11. Of the preferable form of coined money - - 266 

12. Of the party on whom the loss of coin by wear should 

properly fall ..... 267 

XXII. Of signs or representatives of money: 

Sect. 1. Of bills of exchange and letters of credit - - 269 

2. Of banks of deposite ----- 272 

3. Of banks of circulation or discount, and of bank notes, 

or convertible paper .... 274 

4. Of paper-money - . - . . 284 



BOOK II. 

OF THE DISTRIBUTION OF WEALTH. 



I. Of the basis of value, and of supply and demand - - . 288 

II. Of the sources of revenue - - ' - - - 296 

III. Of real and relative variation of price . - _ . 30I 

IV. Of nominal variation of price, and of the peculiar value of bullion 

and of coin ---...- 310 

V. Of the manner, in which revenue is distributed amongst society - 318 
VI. Of what branches of production yield the most liberal recompense 

to productive agency ..... 325 

VII. Of the revenue of industry: 

Sect. 1. Of the profits of industry in goperal - - - 328 

2. Of the profits of the man of science ... 332 

3. Of the profits of the master-agent or adventurer in 

industry ...... 333 

4. Of the profits of the operative labourer - - - 336 

5. Of the independence accruing to the moderns from the 

advancement of industry .... 344 



XVI CONTENTS. 

Page 
VIIL Of the revenue of capital: 

Sect. 1. Of loans at interest - - - - - 347 

2. Of the profic of capital - - - - - 358 

3. Of the employments of capital most beneficial to society 361 
IX. Of the revenue of land: 

Sect. 1. Of the profit of landed property - - - - 363 

2. Ofrent ----... 369 
X. Of the eflfect of revenue derived by one nation from another - 372 

XI. Of the mode in which the quantity of the product affects popula- 
tion: 
Sect. 1. Of population, as connected with political economy - 375 

2. Of the influence of the quality of a national product upon 
the local distribution of the population - - - 385 



BOOK III. 

OF THE CONSUMPTION OF WEALTH. 



I. Of the different kinds of consumption . - . . ggj 

II. Of the eifect of consumption in general - - . - 395 

III. Of the effect of productive consumption - - . . 397 

IV. Of the effect of unproductive consumption in general , - - 400 
V. Of individual consumption, its motives audits efiects - - 405 

VI. On public consumption: 

Sect. 1. Of the nature and general effect of public consumption 416 

2. Of the principal objects of national expenditure - 425 

Of the charge of civil and judicial administration - - 425 

Of charges, military and naval . _ . _ 433 

Of the charges of public instruction - . _ 435 

Of the charges of public benevolent institutions - - 442 

Of the charges of public edifices and works - - 445 

VII. Of the actual contributors to public consumption ■ - 448" 

VIIL Of taxation: 

Sect. 1. Of the effect of all kinds of taxation in general - - 450 

2. Of the different modes of assessment, and the classes 

they press upon respectively _ . . 454 

3. Of taxation in kind - - . . _ 477 

4. Of the territorial or land-tax of England - - 480 
IX. Of national debt: 

Sect. 1. Of the contracting debt by national authority, and of its 

general effect - - - - - 481 

2. Of public credit, its basis, and the circumstances that 

endanger its solidity - . - - - 486 

Appendix ----__. 493 



INTRODUCTION. 



A SCIENCE only advances with certainty, when the plan 
of inquiry and the object of our researches have been clear- 
ly defined; otherwise, a small number of truths are loosely 
laid hold of, without their connexion being perceived, and 
numerous errors, without being enabled to detect their fal- 
lacy. 

For a long time the science of politics, in strictness lim- 
ited to the investigation of the principles which lay the 
foundation of the social order, was confounded with politi- 
cal economy, which unfolds the manner in which wealth is 
produced, distributed and consumed. Wealth, neverthe- 
less, is essentially independent of political organization. 
Under every form of government, a state, whose affairs 
are well administered, may prosper. Nations have risen 
to opulence under absolute monarchs, and have been ruined 
by popular councils. If political liberty is more favourable 
to the development of wealth, it is indirectly; in the same 
manner that it is more favourable to general education. 

In confounding in the same researches the essential ele- 
ments of good government with the principles on which the 
growth of wealth, either public or private, depends, it is by 
no means surprising that authors should have involved these 
subjects in obscurity, instead of elucidating them. Steuart, 
who has entitled his first chapter " Of the Government of 
Mankind," is liable to this reproach; the sect of "Econo- 
mists" of the last century, throughout all their writings, and 
J. J. Rousseau in the article " Political Economy" in the 
Encyclopedic, lie under the same imputation. 

Since the time of Adam Smith, it appears to me, these 
two very distinct inquiries have been uniformly separated; 
the term political economy* being now confined to the sci- 

* From oiKOf, a house, and vo/wo?, a law; economy, the law which regulates the 

3 



XVm INTRODUCTION. 

ence which treats of wealth, and that of politics, to desig-'. 
nate the relations existing between a government and its 
people, and the relations of different states to each other. 

Thp wide range taken into the field of pure politics, 
whilst investigating the subject of political economy, seemed 
to furnish a much stronger reason for including in the same 
inquiry agriculture, commerce and the arts, the true sources 
of wealth, and upon w^hich laws have but an accidental 
and indirect influence. Thence what interminable digres- 
sions ! If, for example, commerce constitutes a branch of po- 
litical economy, all the various kinds of commerce form a 
part; and as a consequence, maritime commerce, naviga- 
tion, geography — where shall we stop? All human know- 
ledge is connected. . Accordingly, it is necessary to ascer- 
tain the points of contact, or the articulations by which 
the different branches are united; by this means, a more 
exact knowledge will be obtained of whatever is peculiar 
to each, and where they run into one another. 

In the science of political economy, agriculture, com- 
merce and manufactures are considered only in relation to 
the increase or diminution of wealth, and not in reference 
to their processes of execution. This science indicates the 
cases in which commerce is truly productive, where what- 
ever is gained by one is lost by another, and where it is 
profitable to all; it also teaches us to appreciate its several 
processes, but simply in their results, at which it stops. 
Besides this knowledge, the merchant must also understand 
the processes of his art. He must be acquainted with the 
commodities in which he deals, their qualities and defects, 
the countries from which they are derived, their markets, 
the means of their transportation, the values to be given 
for them in exchange, and the method of keeping accounts. 

The same remark is applicable to the agriculturist, to 
the manufacturer, and to the practical man of business; 
to acquire a thorough know^ledge of the causes and conse- 

household. Household, according to the Greeks, comprehending all the goods 
in possession of the family; and political, from wc'xij, civitas, extending its appli- 
cation to society or the nation at large. 

Political economy is the best expression that «an be used to designate the 
science discussed in the following treatise, which is not the investigation of 
natural wealth, or that which nature supplies us with gratuitously and without 
limitation, but of social ivealth exclusively, which is founded on exchange and 
the recognition of the right of property, both social regulations. 



INTRODUCTION. XIX 

quences of each phenomenon, the study of poHtical econo- 
my is essentially necessary to them all ; and to become ex- 
pert in his particular pursuit, each one must add thereto a 
knowledge of its processes. These different subjects of 
investigation were not, however, confounded by Dr. Smith ; 
but neither he, nor the writers who succeeded him, have 
guarded themselves against another source of confusion, 
here important to be noticed, inasmuch as the developments 
resulting from it, may not be altogether unuseful in the pro- 
gress of knowledge in general, as well as in the prosecution 
of our own particular inquiry. 

In political economy, as in natural philosophy, and in 
every other study, systems have been formed before facts 
have been established; the place of the latter being sup- 
plied by purely gratuitous assertions. More recently, the 
inductive method of philosophizing, which, since the time of 
Bacon, has so much contributed to the advancement of 
every other science, has been applied to the conduct of our 
researches in this. The excellence of this method consists 
in only admitting facts carefully observed, and the conse- 
quences rigorously deduced from them ; thereby effectually 
excluding those prejudices and authorities which, in every 
department of literature and science, have so often been 
interposed between man and truth. But, is the whole ex- 
tent of the meaning of the term, facts, so often made use of, 
perfectly understood? 

It appears to me, that this word at once designates ob- 
jects that exist and events that take place; thus presenting 
two classes of fads: it is, for example, «ne fact, that such 
an object exists; another fact, that such an event takes 
place in such a manner. Objects that exist, in order to 
serve as the basis of certain reasoning, must be seen exact- 
ly as they are, under every point of view, with all* their 
quahties. Otherwise, whilst supposing ourselves to be 
reasoning respecting the same thing, we may, under the 
same name, be treating of two different things. 

The second class of facts, namely, events that take place, 
consists of the phenomena exhibited, when we observe the 
manner in which things take place. It is, for instance, a 
fact, that metals, when exposed to a certain degree of heat, 
become fluid. 

The manner in which things exiiL:t and take place, con- 
stitutes what is called the nature of things; and a care- 



I 



XX INTRODUCTION. 

ful observation of the nature of things is the sole foundation \ 
of all truth. 

Hence, a twofold classification of sciences; namely, those 
which may be styled descriptive, which arrange and accu- 
rately designate the properties of certain objects, as botany 
and natural history ; and those which may be styled experi- 
mental, which unfold the reciprocal action of substances on 
each other, or in other words, the connexion between 
cause and effect, as chemistry and natural philosophy. 
Both departments are founded on facts, and constitute 
an equally solid and useful portion of knowledge. Polit- 
ical economy belongs to the. latter; in showing the manner 
in which events take place in relation to wealth, it forms a 
part of experimental science.'* 

But facts that take place may be considered in two points 
of view; either as general or constant, or as particular or 
variable. General facts are the results of the nature of 
things in all analogous cases; particular facts as truly result 
from the nature of things, but they are the result of several 
operations modified by each other in a particular case. 
The former are not less incontrovertible than the latter, 
even when apparently they contradict each other. In natural 
philosophy it is a general fact, that heavy bodies fall to 
the earth; the water in a fountain, nevertheless, rises 
above it. The particular fact of the fountain is a result 
wherein the laws of equilibrium are combined with those 
of gravity, but without destroying them. 

In our present inquiry, the knowledge of these two 
classes of facts, namely, of objects that exist, and of events 
that take place, embraces two distinct sciences, political 
economy and statistics. 

Political economy, from facts always carefully observed, 
makes known to us the nature of wealth; from the know- 
ledge of its nature deduces the means of its creation, 
unfolds the order of its distribution, and the phenomena 
attending its destruction. It is, in other words, an 
exposition of the general facts observed in relation to 
this subject. With respect to wealth, it is a knowledge of 

* Experimental science, in order to establish why events take place in a cer- 
tain manner, or to be able to assign a papticular cause for a particular effect, to 
a certain extent must be descriptive. Astronomy, in order to explain the eclipses 
of the sun, must demonstrate the opacity of the moon. Political economy, in 
like manner, in order to show that money is a means of the production of wealth, 
but not the end, must exhibit its true nature. 



INTRODUCTION. XXI 

eftects and of their causes. It shows what facts are con- 
stantly conjoined; so that one is always the sequence of 
the other. But it does not resort for any further explana- 
tions to hypothesis: from the nature of particular events 
their concatenations must be perceived; the science must 
conduct us from one link to another, so that every intelli- 
gent understanding may clearly comprehend in what man- 
ner the chain is united. It is this which constitutes the 
excellence of the modern method of philosophizing. 

Statistics exhibits the amount of production and of con- 
sumption of a particular country, at a designated period; 
its population, mihtary force, wealth, and whatever else is 
susceptible of valuation. It is a description in detail. 

Between political economy and statistics there is the 
same difference as between the science of politics and his- 
tory. 

The study of statistics may gratify curiosity, but it can 
never be productive of advantage when it does not indicate 
the origin and consequences of the facts it has collected; 
and by indicating their origin and consequences, it at once 
becomes the science of political economy. This doubtless 
is the reason why these two distinct sciences have hith- 
erto been confounded. The celebrated work of Dr. Adam 
Smith can only be considered as an immethodical as- 
semblage of the soundest principles of political economy, 
supported by luminous illustrations; of highly ingenious 
researches in statistics, blended with instructive reflections; 
it is not, however, a complete treatise of either science, 
but an irregular mass of curious and original speculations 
and of known demonstrated truths. 

A perfect knowledge of the principles of political econo- 
my may be obtained, inasmuch as all the general facts 
which compose this science may be discovered. In statis- 
tics this never can be the case; this latter science, like 
history, being a recital of facts, more or less uncertain, and 
necessarily incomplete. Of the statistics of former periods 
and distant countries only detached and very imperfect 
accounts can be furnished. With respect to the present 
time, there are few persons who unite the qualifications of 
good observers with a situation favourable for accurate 
observation. The inaccuracy of the statements we are 
compelled to have recourse to, the restless suspicions of 



XXll INTRODUCTION. 

particular governments and even of individuals, their ill- 
will and indifference, present obstacles often insurmounta- , 
ble, notwithstanding the toil and care of inquirers to collect : 
minute details with exactness; and which after all, when in 
their possession, are only true for an instant. Dr. Smith 
accordingly avows, that he puts no great faith in political 
arithmetic; which is nothing more than the arrangement 
of numerous statistical data. 

Political economy, on the other hand, whenever the prin- 
ciples which constitute its basis are the rigorous deduc- 
tions of undeniable general facts, rests upon an immove- 
able foundation. General facts undoubtedly are founded 
upon the observation of particular facts; but upon such 
particular facts as have been selected from those most 
carefully observed, best established, and witnessed by our- 
selves. When the results of these facts have uniformly 
been the same, the cause of their having been so satisfac- 
torily demonstrated, and the exceptions to them even con- 
firming other principles equally well established, we are^ 
authorised to give them as ultimate general facts, and to 
submit them with confidence to the examination of all 
competent inquirers, who may be again desirous of sub- 
jecting them to experiment. A new particular fact, when 
insulated, and the connexion between its antecedents and 
consequents not established by reasoning, is not sufficient 
to shake our confidence in a general fact; for who can say 
that some unknown circumstance has not produced the 
difference noticed in their several results? A light feather 
is seen to mount in the air and sometimes remain there for 
a long time before it falls back to the ground. Would it 
not, nevertheless, be erroneous to conclude that this feather 
is not affected by the universal law of gravitation ? In 
political economy it is a general fact, that the interest of 
money rises in proportion to the risk run by the lender of 
not being repaid. Shall it be inferred that this principle is 
false, from having'seen money lent at a low rate of interest 
upon hazardous occasions ? The lender may have been 
ignorant of the risk, gratitude or fear may have induced 
sacrifices, and the general law, disturbed in this particular 
case, will resume its entire force the moment the causes of 
its interruption have ceased to operate. Finally, how 
small a number of particular facts are completely examined, 



INTRODUCTION. XXllI 

and how few among them are observed under all their 
aspects? And in supposing them well examined, well 
observed, and well described, how many of them either 
prove nothing, or directly the reverse of what is intended 
to be established by them. 

Hence, there is not an absurd theory or an extravagant 
opinion that has not been supported by an appeal to facts;* 
and it is by facts also that public authorities have been so 
often misled. But a knowledge of facts, without a know- 
ledge of their mutual relations, without being able to show 
why the one is a cause and the other a consequence, is 
really no better than the crude information of an office 
clerk, of whom the most intelligent seldom becomes ac- 
quainted with more than one particular series, which only 
enables him to examine a question in a single point of view. 

Nothing can be more idle than the opposition of theory 
to practice! What is theory, if it be not a knowledge of 
the laws which connect effects with their causes, or facts 
with facts ? And who can be better acquainted with facts, 
than the theorist who surveys them under all their aspects, 
and comprehends their relation to each other? And what 
is practice! without theory, but the employment of means 
without knowing how or why they act ? In any investiga- 
tion, to treat dissimilar cases as if they were analogous, is 
but a dangerous kind of empiricism, leading to conclusions 
never foreseen. 

Hence it is, that after having seen the exclusive or re- 
strictive system of commerce, a system founded on the 
opinion that one nation can only gain what another loses, 
almost universally adopted throughout Europe after the 
revival of arts and letters; after having seen taxation 
without intermission perpetually increasing, and in some 
countries extending itself to a most enormous amount; 
and after having seen these same countries become more 
opulent, more populous, and more powerful, than at the 

* In France, the minister of the interior in his expose of 1813, a most disas- 
trous period, when foreign commerce was destroyed, and the national resources 
of every description rapidly declining-, boasted of having proved by indubitable 
calculations, that the country was in a higher state of prosperity than it ever 
before had been. 

t By the term practice, is not here meant the manual skill which enables the 
artifice; or clerk to execute with greater celerity and precision whatever he 
performs daily, and which constitutes his peculiar talent; but the method pur- 
sued in superintending and administering public or private affairs. 



XXIV INTRO 

time they carried on an unrestricted trade and were almost 
entirely exempt from public burdens, the generality of 
mankind have concluded that national wealth and power 
were attributable to the restraints imposed on the applica- 
tion of industry, and to the taxes levied from the incomes 
of individuals. Shallow thinkers have even pretended that 
this opinion was founded on facts, and that every different; 
one was the offspring of a wild and disordered imagination. 
It is, however, on the contrary evident that the suppor- 
ters of the opposite opinion embraced a wider circle of 
facts and understood them much better than their oppo- 
nents. The very remarkable impulse given, during the 
middle ages, to the industry of the free states of Italy and 
of the Hanse towns of the north of Europe, the spectacle 
of riches it exhibited in both, the shock of opinions occa- 
sioned by the crusades, the progress of the arts and 
sciences, the improvement of navigation and consequent 
discovery of the route to India and of the continent of 
America, as well as a succession of other less important 
events, were all known to them as the true causes of 
the increased opulence of the most ingenious nations on 
the globe. And although they were aware that this acti- 
vity had received successive checks, they at the same time 
knew that it had been freed from more oppressive obsta- 
cles. In consequence of the authority of the feudal lords 
and barons declining, the intercourse between the different 
provinces and states could no longer be interrupted ; roads 
became improved, travelling more secure, and laws less 
arbitrary ; the enfranchised towns, becoming immediately 
dependent upon the crown, found the sovereign interested 
in their advancement; and this enfranchisement, which 
the natural course of things and the progress of civiliza- 
tion had extended to the country, secured to every class of 
producers the fruits of their industry. In every part of 
Europe personal freedom became more generally respected; 
if not from a more improved organization of political so- 
ciety, at least from the influence of public sentiment. Cer- 
tain prejudices, such as branding with the odious name of 
usury ail loans upon interest, and attaching the importance 
of nobility to idleness, had begun to decline. Nor is this 
all. Enlightened individuals have not only remarked the 
influence of these, but of many other analogous facts; it 



INTRODUCTION. XXV 

has been perceived by them, that the decUne of prejudices 
has been favourable to the advancement of science, or to 
a more exact knowledge of the immutable laws of nature j 
that this improvement in the cultivation of science has 
itself been favourable to the progress of industry, and in- 
dustry to national opulence. From such an induction of 
facts they have been enabled to conclude, with much greater 
certainty than the unthinking multitude, that although 
niany modern states in the midst of taxation and restric- 
tions have risen to opulence and power, it is not owing to 
these restraints on the natural course of human affairs, but 
in spite of such powerful causes of discouragement. The 
prosperity of the same countries would have been much 
greater, had they been governed by a more liberal and en- 
lightened policy.* 

To obtain a knowledge of the truth, it is not then so ne- 
cessary to be acquainted with a great number of facts, as 
with such as are essential and have a direct and immediate 
influence J and, above all, to examine them under all their 
aspects, to be enabled to deduce from them just conclusions, 
and be assured that the consequences ascribed to them do 
not in reality proceed from other causes. Every other 
knowledge of facts, like the erudition of an almanac, is a 
mere compilation from which nothing results. And it may 
be remarked, that this sort of information is peculiar to men 
of clear memories and clouded judgments; men who de- 
claim against the best established doctrines, the fruits of 
the most enlarged experience and profoundest reasoning; 
and whilst inveighing against system, whenever their own 
routine is departed from, are precisely those most under its 
influence, and who defend it with stubborn folly, fearful rather 
of being convinced, than desirous of arriving at certainty. 

Thus, if from all the phenomena of production, as well 
as from the experience of the most extensive commerce, 

* Hence it is, that nations seldom derive any benefit from the lessons of expe- 
rience. To profit by them, the community at large must be enabled to seize the 
connexion between causes and their consequences; which at once supposes a 
very high degree of intelligence and a rare capacity for reflection. ^Vhenever 
mankind shall be in a situation to profit by experience, they will no longer 
require her lessons; plain sound sense will then be sufficient. This is one rea- 
son of our being subject to the necessity of constant control. All that a people 
can desire is that laws conducive to the general interest of society should be 
enacted and carried into effect; a problem which different political constitutions 
more or less imperfectly solve. 

4 



XXVI INTRODUCTION. 



you demonstrate that a free intercourse between nations is 
reciprocally advantageous, and that the mode found to be 
most beneficial to individuals in transacting business with 
foreigners, must be equally so to nations, men of contracted 
views and high presumption will accuse you of system. 
Ask them for their reasons, and they will immediately talk 
to you of the balance of trade; will tell you it is clear 
that a nation must be ruined by exchanging its money for 
merchandise — in itself a system. Some will assert that 
circulation enriches a state, and that a sum of money, by 
passing through twenty different hands, is equivalent to 
twenty times its own value; others, that luxury is favour- 
able to industry, and economy ruinous to every branch of 
commerce — both mere systems; and all will appeal to facts 
in support of these opinions, like the shepherd, who upon 
the faith of his eyes affirmed that the sun, which he saw 
rise in the morning and set in the evening, during the day 
traversed the whole extent of the heavens, treating as an 
idle dream the laws of the planetary world. 

Persons, moreover, distinguished by their attainments in 
other branches of knowledge, but ignorant of the principles 
of this, are too apt to suppose that absolute truth is confined 
to the mathematics and to the results of careful observa- 
tion and experiment in the physical sciences; imagining 
that the moral and political sciences contain no invariable 
facts or indisputable truths, and therefore cannot be con- 
sidered as genuine sciences, but merely hypothetical sys- 
tems, more or less ingenious, but purely arbitrary. The 
opinion of this class of philosophers is founded upon the 
want of agreement among the writers who have investiga- 
ted these subjects, and from the wild absurdities taught by 
some of them. But what science has been free from ex- 
travagant hypothesis? How many years have elapsed 
since those most advanced have been altogether disen- 
gaged from system? On the contrary, do we'not still see 
men of perverted understandings attacking the best estab- 
lished positions? Forty years have not elapsed since wa- 
ter, so essential to our very existence, and the atmosphere 
m which we perpetually "breathe, have been accurately 
analyzed. The experiments and demonstrations, neverthe- 
less, upon which this doctrine is founded are continually 
assailed; although repeated a thousand times in different 



INTRODUCTION. XXVll 

countries by the most acute and cautious experimenters. 
A want of agreement exists in relation to a description of 
facts much more simple and obvious than the most part of 
those in moral and political science. Are not natural phi- 
losophy, chemistry, botany, mineralogy, and physiology still 
fields of controversy, in which opinions are combated with 
as much violence and asperity as in political economy ? 
The same facts are, indeed, observed by both parties, but 
are classed and explained differently by each ; and it is 
worthy of remark, that in these contests genuine philoso- 
phers are not arrayed against pretenders. Leibnitz and 
Newton, Linnseus and Jussieu, Priestley and Lavoisier, De- 
saussure and Dolomieu, were all men of uncommon genius, 
who, however, did not agree in their philosophical systems. 
But have not the sciences they taught an existence, not- 
withstanding these disagreements?* 

In like manner, the general facts constituting the scien- 
ces of politics and morals exist independently of all contro- 
versy. Hence the advantage enjoyed by every one who, 

* "The controversies," says Col. Torrens, in his ' Essay on the Production 
of Wealth,' published in 1821, "which at present exist amongst the most cele- 
brated masters of political economy, have been brought forward by a lively and 
ingenious author as an objection against the study of the science. A similar 
objection might have been urged, in a certain stage of its progress, against every 
branch of human knowledge. A few years ago, when the brilliant discoveries 
in chemistry began to supersede the ancient doctrine of phlogiston, controver- 
sies, analogous to those which now exist amongst political economists, divided 
the professors of natural knowledge; and Dr. Priestley, like Mr. Malthus, ap- 
peared as the pertinacious champion of the theories which the facts established 
by himself had so largely contributed to overthrow. In the progress of the 
human mind, a period of controversy amongst the cultivators of any branch of 
science must necessarily precede the period of their unanimity. But this, in- 
stead of furnishing a reason for abandoning the pursuits of science while its first 
principles remain in uncertainty, should stimulate us to prosecute our studies 
with more ardour and perseverance until upon every question within the com- 
pass of the human faculties, doubt is removed and certainty attained. With 
respect to political economy, the period of controversy is passing away, and 
that of unanimity rapidly approaching. Twenty years hence there will scarcely 
exist a doubt respecting any of its fundamental principles." 

And in the preface of the third edition of his ' Essay on the External Corn 
Trade,' published in 1826, Col. Torrens makes these farther remarks: " On a 
former occasion, the author ventured to predict, that at no distant period, contro- 
versy amongst the professors of political economy would cease, and unanimity 
prevail, respecting the fundamental principles of the science. He thinks he can 
already perceive the unequivocal signs of the approaching fulfilment of this 
prediction. Since it was hazarded, two works have appeared, each of which, 
in its own peculiar line, is eminently calculated to correct the errors which pre- 
viously prevailed. These publications are, 'A Critical Dissertation on the Na- 
ture, Causes, and Measures of Value, by an anonymous author;' and 'Thoughts 
and Details on High and Low Prices, by Mr. Tooke.' " 

American Editor. 



XXViii INTRODUCTION. 

from distinct and accurate observation, can establish the 
existence of these general facts, demonstrate their connex- 
ion and deduce their consequences. They as certainly 
proceed from the nature of things as the laws of the mate- 
rial world. We do not imagine them; they are results 
disclosed to us by judicious observation and analysis. 
Sovereigns, as well as their subjects, must bow to their 
authority, and never can violate them with impunity. 

General facts, or, if you please, the general laws which 
facts follow, are styled principles whenever it relates to their 
apphcation ; that is to say, the moment we avail ourselves 
of them in order to ascertain the rule of action of any com- 
bination of circumstances presented to us. A knowledge 
of principles furnishes the only certain means of uniformly 
conducting any inquiry with success. 

Political economy, in the same manner as the exact 
sciences, is composed of a few fundamental principles, and 
of a great number of corollaries or conclusions drawn from 
these principles. It is essential, therefore, for the advance- 
ment of this science that these principles should be strictly 
deduced from observation; the number of conclusions to be 
drawn from them may afterwards be either multiplied or 
diminished at the discretion of the inquirer, according to 
the object he proposes. To enumerate all their conse- 
quences and give their proper explanations would be a 
work of stupendous magnitude, and necessarily incomplete. 
Besides, the more this science shall become improved and 
its influence extended, the less occasion will there be to 
deduce consequences from its principles, as these will spon- 
taneously present themselves to every eye; and being 
within the reach of all, their application will be readily 
made. A treatise on political economy will then be con- 
fined to the enunciation of a few general principles, not 
requiring even the support of proofs or illustrations ; be- 
cause these will be but the expression of what every one 
will know, arranged in a form convenient for compre- 
hending them, as well in their whole scope as in their 
relation to each other. 

It would, however, be idle to imagine that greater pre- 
cision, or a more steady direction could be given to this 
study, by the application of mathematics to the solution of 
its problems. The values with which political economy is 



INTRODUCTION. XXIX 

concerned, admitting of the application to them of the terms 
plus and minus, are indeed, within the range of mathema- 
tical inquiry; but being at the same time subject to the in- 
fluence of the faculties, the wants and the desires of mankind, 
they are not susceptible of any rigorous appreciation, and 
can not, therefore, furnish any data for absolute calcula- 
tions. In political as well as in physical science, all that 
is essential is a knowledge of the connexion between causes 
and their consequences. Neither the phenomena of the 
moral or material world are subject to strict arithmetical 
computation.* 

* We may, for example, know that for any given year the price of wine will 
infallibly depend upon the quantity to be sold, compared with the extent of the 
demand. But if we are desirous of submitting these two data to mathematical 
calculation, their ultimate elements must be decomposed before we can become 
thoroughly acquainted with them, or can, with any degree of precision, distin- 
guish the separate influence of each. Hence, it is not only necessary to deter- 
mine what will be the product of the succeeding vintage, while yet exposed, to 
the vicissitudes of the weather, but the quality it will possess, the quantity 
remaining on hand of the preceding vintage, the amount of capital that will be 
at the disposal of the dealers, and require them, more or less expeditiously, to 
get back their advances. We must also ascertain the opinion that may be enter- 
tained as to the possibility of exporting the article, which will altogether depend 
upon our impressions as to the stability of the laws and government, that vary 
from day to day, and respecting which no two individuals exactly agree. All 
these data, and probably many others besides, must be accurately appreciated, 
solely to determine the quantity to be put in circulation; itself but one of the 
elements oi price. To determine the quantity to be demanded, the price at which 
the commodity can be sold must already be known, as the demand for it will 
increase in proportion to its cheapness; we must also know the former stock on 
hand, and the tastes and means of the consumers, as various as their persons. 
Their ability to purchase will vary according to the more or less prosperous 
condition of industry in general and of their own in particular; their wants will 
vary also in the ratio of the additional means at their command of substituting 
one liquor for another, such as beer, cider, &c. I suppress an infinite number of 
less important considerations, more or less affecting the solution of the problem; 
for I question whether any individual, really accustomed to the application of 
mathematical analysis, would even venture to attempt this, not only on account 
of the numerous data, but in consequence of the difiiculty of characterizing them 
with any thing like precision, and of combining their separate influences. Such 
persons as have pretended to do it, have not been able to enunciate these ques- 
tions in analytical language, without divesting them of their natural complica- 
tion, by means of simplifications, and arbitrary suppressions, of which the 
consequences, not properly estimated, always essentially change the condition 
of the problem, and pervert all its results; so that no other inference can be de- 
duced from such calculations than from formula arbitrarily assumed. Thus, 
instead of recognising in their conclusions that harmonious agreement which 
constitutes the peculiar character of rigorous geometrical investigation, by what- 
ever method they may have been obtained, we only perceive vague and uncertain 
inferences, whose differences are often equal to the quantities sought to be de- 
termined. What course is then to be pursued by a judicious inquirer in the 
elucidation of a subject so much involved? The same which would be pursued 
by him, under circumstances equally difficult, which decide the greater part of 



XXX INTRODUCTION. 

These considerations respecting the nature and object 
of poHtical economy, and the best method of obtaining a 
thorough knowledge of its principles, will supply us with 
the means of appreciating the efforts hitherto made towards 
the advancement of this science. 

The literature of the ancients, their legislation, their 
public treaties, and their administration of the conquered 
provinces, all proclaim their utter ignorance of the nature 
and origin of wealth, of the manner in which it is distri- 
buted, and of the effects of its consumption. They knew, 
what has always been known wherever the right of pro- 
perty has been sanctioned by laws, that riches are increased 
by economy and diminished by extravagance. Xenophon 
extols order, activity and intelligence as certain means of 
obtaining prosperity; but without deducing these maxims 
from any general law, or without being able to show the 
connexion between causes and their consequences. He 
advises the Athenians to protect commerce and to receive 
strangers with kindness; yet so little was he aware to 
what extent this advice would be proper, that, upon another 

the actions of his life. He will examine the immediate elements of the pro- 
posed problem, and after having ascertained them with certainty, (which in 
political economy can be efFected,) will approximately value their mutual influ- 
ences with the intuitive quickness of an enlightened understandintr, itself only 
an instrument by means of which the mean result of a crowd of probabilities can 
be estimated, but never calculated .with exactness. 

Cabanis, in describing the revolutions in the science of medicine, makes a 
remark perfectly analogous to this. ' The vital phenomena,' says he, ' depend 
upon so many unknown springs, held together under such various circumstances, 
which observation vainly attempts to appreciate, that these problems, from not 
being stated with all their conditions, absolutely defy calculation. Hence when- 
ever writers on mechanics have endeavoured to subject the laws of life to their 
method, they have furnished the scientific world with a remarkable spectacle, 
well entitled to our most serious consideration. The terms they employed were 
correct, the process of reasoning strictly logical, and, nevertheless, all the results 
were erroneous. Further, although the language and the method of employing 
It were the same among all the calculators, each of them obtained distinct and 
dilterent resu ts; and it is by the application of this method of investigation to 
subjects to which It IS altogether inapplicable, that systems the most whimsical, 
lallacious and contradictory have been maintained.' 

D'Alerabert, in his treatise on Hydrodynamics, acknowledges that the velocity 
ot the blood in its passage through the vessels entirely resists every kind of 
calculation. Senebier made a similar observation in his Essai sur Vdrt d'obser- 
ver, (vol. I, page 81.) 

Whatever has been said by able teachers and judicious philosophers, in rela- 
tion to our conclusions in natural science, is much more applicable to moral; and 
points out the cause of our always being misled in political economy, whenever 
we have subjected its phenomena to mathematical calculation. In such case it 
becomes the most dangerous of all abstractions. 



INTRODUCTION. XXXI 

occasion, he expresses doubts whether commerce be really 
profitable to the republic. 

Plato and Aristotle, it is true, notice some invariable 
relations between the different modes of production, and 
the results obtained from them. Plato sketches with tol- 
erable fidelity,* the effects of the separation of social em- 
ployments; but it is simply with a view to illustrate man's 
social character and the necessity he is in, from his multi- 
farious wants, of uniting in extensive societies in which each 
individual may be exclusively occupied with one species of 
production. His view is entirely a political one ; and he 
has deduced from it no other conclusion. 

In his treatise on Politics, Aristotle goes farther. He 
distinguishes natural from artificial production. He styles 
natural, whatever creates those objects of consumption 
required by a family, or, at most, whatever is obtained by 
exchanges in kind. No other advantage, according to 
him, is derived from real production; artificial gain he 
condemns. Besides, he does not support these opinions by 
any reasoning founded upon accurate observation. From 
the manner in which he expresses himself in relation to the 
effect of savings and loans on interest, it is evident that he 
knew nothing of the nature and employment of capital. 

What can we expect from nations still less advanced in 
civilization than the Greeks? We may recollect that a 
law of Egypt obliged the son to adopt the profession of 
his father. This, in certain cases, was to require the 
creation of a greater quantity of products than the parti- 
cular state of society called for ; to oblige an individual, 
in order to obey the law, to ruin himself and to continue 
the exercise of his productive functions, whether in pos- 
session of capital or not ; which is altogether absurd.t 
The Romans, in treating every branch of industry, except 
agriculture (and we know not why,) with contempt, betray 
the same ignorance. Their pecuniary transactions must 
be numbered amongst their most unskilful operations. 

The moderns, even after having freed themselves from 
the barbarism of the middle ages, have not for a very long 

* Republic, Book II. 

t When we find almost every historian, from Herodotus to Bossuet, boasting 
of this and other similar laws, it will be seen how important it is that all who 
undertake to write history should have some knowledge of the science of politi- 
cal economy. 



XXxii INTRODUCTION. 

time been more advanced. We shall have occasion to 
notice the stupidity of a multitude of laws relating to the 
Jews, to the interest of money, and to money itself. Henry 
IV. granted to his favourites and mistresses, as favours 
which cost him nothings the permission to practise a thou- 
sand petty extortions, and to collect for their own benefit, 
from various branches of commerce, as many petty taxes.; 
He authorized the count of Soissons to levy a duty of fif-'; 
teen sous upon every bale of merchandise which should be 
exported from the kingdom !* 

In every branch of knowledge, example has preceded 
precept. The fortunate enterprises of the Portuguese and 
Spaniards during the fifteenth century, the active industry 
of Venice, Genoa, Florence, Pisa, the provinces of Flan- 
ders, and the free cities of Germany at this same epoch, 
gradually directed the attention of some philosophers to 
the theory of wealth. \ 

These inquiries, like almost every other in the arts and 
sciences, after the revival of letters, originated in Italy. 
As far back as the sixteenth century, Botero was engaged 
in investigating the real sources of public prosperity. In 
the year 1613, Antonio Serra composed a treatise, in which 
he particularly noticed the productive power of industry; 
but the title of his work sufficiently indicates its errors. 
Wealth, according to his hypothesis, consisted only of 
gold and silver.t Davanzati wrote upon money and upon 
exchange ; and at the beginning of the eighteenth century, 
fift}'^ years before the time of Quesnay, Bandini of Sienna 
had shown, both from reasoning and experience, that there 
never had been a scarcity of food, except in those coun- 
tries where the government had itself interfered to supply 
the people. Belloni, a banker at Rome, in the year 1750, 
published a dissertation on commerce, evincing his intimate 
acquaintance with the nature of money and exchanges, 
although at the same time infected with the theory of the 
balance of trade. His labours were rewarded by the Pope 
with the title of marquess. Carli, before Dr. Smith, de- 
monstrated that the balance of trade neither taught nor 
proved any thing. Algarotti, whose writings on other 

* See Sully's Memoirs, Book xvi. 

f Breve Trattato delle cause che possono far abondare It regni dforo et cfurgento 
dove non sono miniere. 



INTRODUCTION. XXXili 

subjects Voltaire has made known, wrote also upon the 
science of political economy; and the little he has left 
exhibits the accuracy and extent of his knowledge, as 
well as his acuteness. He confines himself so strictly 
to facts, and so uniformly founds his speculations on the 
nature of things, that although he did not get possession 
of the proof of his principles, and of their relation to 
each other, he has, nevertheless, guarded himself against 
every thing like hypothesis and system. In 1764, Geno- 
vesi commenced a course of public lectures on political 
economy, in the chair founded at Naples by the care of the 
highly esteemed and learned Ifitieri. In consequence of 
this example, other professorships of political economy 
were afterwards established at Milan, and more recently 
in most of the universities in Germany and Russia. 

In 1750, the abbe Galiani, so well known since from his 
connexion with many of the French philosophers, and by 
his Dialogues on the Corn Trade, although at that time a 
very young man, published a Treatise on Money, which 
discovered such uncommon talents and information, as to 
induce a belief that he had been assisted in the composi- 
tion of his work by the abbe Intieri and the Marquess of 
Rinuccini. Its merits, however, appear to be of a descrip- 
tion similar to those the author's writings always after- 
wards displayed; genius united with erudition, carefulness 
in uniformly ascending to the nature of things; and an 
animated and elegant style. 

One of the most striking peculiarities of this work, is its 
containing some of the rudiments of the doctrine of Adam 
Smith; among others, that labour is the sole creator of 
the value of things or of wealth;* a principle although not 

* " Entro ora a dire della factica, la quale, non solo in tute le opere que sono 
intierainente dell' arte come le pitture, sculture, intagli, etc., ma anchi in molti 
corpi, come sono i minerali, i sassi, le piante spontanee delle selve, etc. e Tunica 
che da valore alia cosa. La quantita della materia non per altro coopera in 
questi corpi al valore se non parche aumenta o sema la fatica." (Galuni, della 
Moneta. Lib. I, cap. 2.) 

" In relation to labour I will remark, that not only in productions which are 
entirely the work of art, as in painting, sculpture, engraving, &c. but likewise 
in productions of nature, as on metals, minerals and plants, their value is entirely 
derived from the labour bestowed on their creation. The quantity of matter 
aflects the value of things only so far as it requires more or less labour." 

In the same chapter Galiani also remarks, that man, that is to say his labour, 
is the only correct measure of v^lue. This, also, according to Dr. Smith, is a 
principle; although considered by me as an error. 

5 



Xxxiv • INTRODUCTION. 

rigorously true, as will be made manifest in the course of 
this work, but which pushed to its ultimate consequences, 
would have put Galiani in the way of discovering and com- 
pletely unfolding the phenomena of production. Dr. Smith, 
who was about the same time a professor in the university 
of Glasgow, and then taught this doctrine, which has since 
acquired so much celebrity, in all probabihty had no know- 
ledge of a work in the Italian language published at Naples 
by a young man then hardly known, and whom he has 
never quoted. But even had he known it, a truth can not 
with so much propriety be said to belong to its fortunate 
discoverer, as to the inquirer who first proves that it must 
be so and demonstrates its consequences. Although the 
existence of universal gravitation had been previously con- 
jectured by Kepler and Pascal, the discovery does not the 
less belong to Newton.* 

In Spain, Alvarez Osorio and Martinez-de-mata have de 
livered discourses on political economy, the publication of 
which we owe to the enlightened patriotism of Campomanes, 
Moncada, Navareite, Ustaritz, Ward, and U//oa have written 
on the same subject. These esteemed authors, like those 
of Italy, entertained many sound views, verified varioul 
important facts, and supphed a number of laborious calcu- 
lations; but from their inability to estabhsh them upon th( 
fundamental principles of the science, which were not thei 
known, they have often been mistaken both as to the enrf 
as well as the means of prosecuting this study; and amidst 
a variety of useless disquisitions have only cast an uncer|j 
tain and" deceptive light .t 

In France the science of political economy, at first, was 

* This same Galiani remarks, in the same work, that whatever is gained by 
some must necessarily be lost by others; in this way proving, that a very inge- 
nious writer may not even know how to deduce .the most simple conclusions, 
and may pass by the truth without perceiving it. For, if wealth can be created 
by labour, there may then be a new description of wealth in the world, not taken 
from any body. Indeed this author, in his Dialogues on the Corn Trade, pub- 
lished in France a long time afterwards, has himself, in a very peculiar manner, 
pronounced his own condemnation. " A. truth," he observes, " which is brought 
to light by pure accident, like a mushroom in a meadow, is of no value; we can 
not make use of it, if we are ignorant of its origin and consequences; or how and 
by what chain of reasoning it is derived." ^ , -• i. 

t From my own inability of judging of the merits of such of these writers 
whose works have not been translated, I have availed myself of the opinions ot 
one of the translators of this Treatise into the Spanish language, Don Jose 
Queypo, an individual alike distinguished by his abilities and patriotism, whose 
remarks I have only copied. 



11 



INTRODUCTION. XXXV 

only considered in its application to public finances. Sully 
remarks correctly enough, that agriculture and commerce 
are the two teats of the state; but from a vague and in- 
distinct conception of the truth. The same observation 
may be applied to Vauban, a man of a sound practical mind, 
and although in the army, a philosopher and friend of 
peace, who, deeply afflicted with the misery into which 
his country had been plunged by the vain glory of Louis 
XIV., proposed a more equitable assessment of the taxes, 
as a means of alleviating the public burdens. 

Under the influence of the regent, opinions became un- 
settled ; bank notes, supposed to be an inexhaustible source 
of wealth, were only the means of swallowing up capital, 
of expending what had never been earned, and of making 
a bankruptcy of all debts. Moderation and economy were 
turned into ridicule. The courtiers of the prince, either by 
persuasion or corruption, encouraged him in every species 
of extravagance. At this period, the maxim that a state is 
enriched by luxury was reduced to system. All the talents 
and wit of the day were exerted in gravely maintaining such 
a paradox in prose, or in embellishing it with the more at- 
tractive charms of poetry. The dissipation of the national 
treasures was really supposed to merit the public gratitude. 
The ignorance of first principles, with the debauchery and 
licentiousness of the duke of Orleans, conspired to effect 
the ruin of the kingdom. During the long peace maintain- 
ed by cardinal Fleury, France recovered a little; the in- 
significant administration of this weak minister at least 
proving, that the ruler of a nation may achieve much 
good by abstaining from the commission of evil. 

The steadily increasing progress of different branches 
of industry, the advancement of the sciences, whose influ- 
ence upon wealth we shall have occasion hereafter to no- 
tice, and the direction of public opinion, at length estimat- 
ing national prosperity as being of some importance, caused 
the science of political economy to enter into the contem- 
plation of a great number of writers. Its true principles 
were not then known; but since, according to the obser- 
vation of Fontenelle, our condition is such, that we are 
not permitted at once to arrive at the truth, but must pre- 
viously pass through various species of errors and various 
grades of folhes, ought these false steps to be considered 



XXXVi INTRODUCTION. 

as altogether useless, which have taught us to advance with 
more steadiness and certainty? 

Montesqieu, who was desirous of considering law^s in all 
their relations, inquired into their influence on national 
wealth. The nature and origin of wealth he should first 
have ascertained; of which, however, he did not form any 
opinion. We are, nevertheless, indebted to this distin- 
guished author for the first philosophical examination of 
the principles of legislation ; and, in this point of view, he, 
perhaps, may be considered as the master of the English 
writers, who are so generally esteemed as being ours; 
just in the same manner as Voltaire has been the master 
of their best historians, who now furnish us with models 
worthy of imitation. 

About the middle of the eighteenth century, certain 
principles in relation to the origin of wealth, advanced by 
doctor Quesnay, made a great number of proselytes. The 
enthusiastic admiration manifested by these persons for 
the founder of their doctrines, the scrupulous exactness 
with which they have uniformly since followed the same 
dogmas, and the energy and zeal they displayed in main- 
taining them, have caused them to be considered as a sect, 
which has received the name of economists. Instead of 
first observing the nature of things, or the manner in which 
they take place, of classifying these observations and de- 
ducing from them general propositions, they commenced by 
laying down certain abstract general propositions, which 
they styled axioms, from supposing them to contain inhe- 
rent evidence of their own truth. They then endeavoured 
to accommodate the particular facts to them, and to infer 
from them their laws; thus involving themselves in th 
defence of maxims evidently at variance with commo 
sense and universal experience,* as will appear hereafter i 
various parts of this work. Their opponents had no 
themselves formed any more correct views of the subjects 
in controversy. With considerable learning and talents on 
both sides, they were either wrong or right by chance. 
Points were contested that should have been conceded, and 
opinions,unquestionably false, acquiesced in; in short, they 
combated in the clouds. Voltaire, who so well knew ho 

* When tbey maintain, for example, that a fall in the price of food is a public 
calamity. 



INTRODUCTION. XXXVH 

to detect the ridiculous, wherever it was to be found, in his 
Homme mix quarante ecus, satirised the system of the econo- 
mists ; yet, in exposing the tiresome trash of Mercer de la 
Riviere^ and the absurdities contained in Mirahcaii's Vami 
des Hommes, he was himself unable to point out the errors 
of either. 

The economists, by promulgating some important truths, 
directing a more general attention to objects of public 
utility, and by exciting discussions, which, although at that 
time of no advantage, subsequently led to more accurate 
investigations, have unquestionably done much good.* In 
representing agricultural industry as productive of wealth, 
they were not deceived; and, perhaps, the necessity they 
were in of unfolding the nature of production, caused the 
further examination of this important phenomenon, which 
conducted their successors to its entire development. On 
the other hand, the labours of the economists have been at- 
tended with serious evils ; the many useful maxims they 
decried, their sectarian spirit, the dogmatical and abstract 
language of the greater part of their writings, and the tone 
of inspiration pervading them, gave currency to the opin- 
ion, that all who were engaged in such studies were but idle 
dreamers, whose theories, at best only gratifying literary 
curiosity, were wholly inapplicable in practice.! 

No one, however, has ever denied that the writings of 

♦ Among the discussions they provoked, we must not forget the entertaining 
Dialogues on the Corn Trade, by the abbe Galiani, in which the science of poli- 
tical economy is treated in the humorous manner of Tristram Shandy. An 
important truth is asserted, and when the author is called upon for its proof, he 
replies with some ingenious pleasantry. • i u 

t The belief that moral and political science is founded upon chimerical theo- 
ries, arises chiefly from our almost continually confounding questions of right 
with matters of fact. Of what consequence, for instance, is the question so long 
agitated in the writings of the economists, whether the sovereign power m a 
country is, or is not, the co-proprietor of the soil? The fact is, that in every 
country the government takes, or in the shape of taxes the people are compelled 
to furnish it, with a part of the revenue drawn from real estate. Here then is a 
fact, and an important one; the consequence of certain facts, which we can 
trace up, as the cause of other facts (such as the rise in the price of commodi- 
ties) to which we are led with certainty. Questions of right are always more or 
less matters of opinion; matters of fact, on the contrary, are susceptible of proof 
and demonstration. The former exercise but little influence over the fortunes of 
mankind; while the latter, inasmuch as facts grow out of each other, are deeply 
interesting to them; and, as it is of importance to us that some results should 
take place in preference to others, it is, therefore, essential to ascertain the means 
by which these may be obtained. The Social Contract of J. J. Rousseau, from 
being almost entirely founded upon questions of right, has thereby become, 
what I feel no hesitation in avowing, a work of at least but little practical utility. 



XXXVlll INTRODUCTION. 



the economists have uniformly been favourable to the 
strictest morality, and to the liberty which every human 
being ought to possess, of disposing of his person, fortune 
and talents, according to the bent of his inclinatiou ; with- 
out which, indeed, individual happiness and national pros- 
perity are but empty and unmeaning sounds. These 
opinions alone entitle their authors to universal gratitude 
and esteem. I do not, moreover, believe that a dishonest 
man or bad citizen can be found among their number. 

This doubtless is the reason why, since the year 1760, 
almost all the French writers of any celebrity on subjects 
connected with political economy, without absolutely being 
enrolled under the banners of the economists, have, never- 
theless, been influenced by their opinions. Raynal, Con- 
dorcet, and many others, will be found among this number. 
Condillac may also be ermmerated among them, notwith- 
standing his endeavours to found a system of his own in 
relation to a subject which he did not understand. Many 
useful hints may be collected from amidst the ingenious 
trifling of his work;* but, like the economists, he almost 
invariably founds a principle upon some gratuitous assump- 
tion. Now, an hypothesis may indeed be resorted to, in 
order to exemplify and elucidate the correctness of an au- 
thor's general reasoning, but never can be sufficient to 
establish a fundamental truth. Political economy has only 
become a science since it has been confined to the results 
of inductive investigation. 

Turgot was himself too good a citizen, not sincerely to 
esteem as good citizens as the economists; and accordingly, , 
when in power, he deemed it advantageous to countenance 
them. The economists, in their turn, found their account 
in passing off* so enhghtened an individual and minister of 
state as one of their adepts; the opinions of Turgot, how- 
ever, were not borrowed from their school, but derived from 
the nature of things; and although on many important 
points of doctrine he may have been deceived, the measures 
of his administration, either planned or executed, are 
amongst the most brilliant ever conceived by any states- 
man. There can not, therefore, be a stronger proof of the 
incapacity of his sovereign, than his inability to appreciate 

Du Commerce ef du Governemenf con/ttdcres Vun relaiivement a Vautre. 



INTRODUCTION. XXXIX 

such exertions, or if capable of appreciating them, in not 
knowing how to afford them support. 

The economists not only exercised a particular sway 
over French writers, but also had a very remarkable in- 
fluence over many Italian authors, who even went beyohd 
them. Beccaria, in a course of public lectures at Milan,* 
first analysed the true functions of productive capital. The 
Count de Verri, the countryman and friend of Beccaria, 
and worthy of being so, both a man of business and an ac- 
complished scholar, in his Meditazione suW Economia poli- 
tical published in 1771, approached nearer than any other 
writer, before Dr. Smith, to the real laws which regulate 
the production and consumption of wealth. Filangieri, 
whose treatise on political and economical laws was not 
given to the public until the year 1780, appears not to have 
been acquainted with the work of Dr. Smith, published four 
years before. The principles de Verri laid down are fol- 
lowed by Filangieri, and even received from him a more 
complete development; but although guided by the torch of 
analysis and deduction, he did not proceed from the most 
fortunate premises to the immediate consequences which 
confirm them, at the same time that they exhibit their ap- 
plication and utility. 

But none of these inquiries could lead to any important 
result. How, indeed, was it possible to become acquainted 
with the causes of national prosperity, when no clear or 
distinct notions had been formed respecting the nature of 
wealth itself? The object of our investigations must be 
thoroughly perceived before the means of attaining it are 
sought after. In the year 1776, Adam Smith, educated in 
that school in Scotland which has produced so many scho- 
lars, historians and philosophers of the highest celebrity, 
published his hiquiry into the Nature and Causes of the 
Wealth of Nations. In this work, its author demonstrated 
that wealth was the exchangeable value of things; that its 
extent was proportional to the number of things in our pos- 
session having value; and that inasmuch as value could be 
given or added to matter, that wealth could be created and 

* See the syllabus of his lectures, which was printed for the first time in tbe 
year 1804, in the valuable collection published at Milan by Pietro Custodi, under 
the title of Scrittori classici italiani di economia politica. It was unknown to me 
until after the publication of the first edition of this work in 1803. 



Xl INTRODUCTION. 



I 



engrafted on things previously destitute of value, and therie 
be preserved, accumulated or destroyed.* 

In inquiring into the origin of value, Dr. Smith found it 
to be derived from the labour of man, which he ought to 
have denominated industry, from its being a more compre- 
hensive and significant term than labour. From this fruit- 
ful demonstration he deduced numerous and important 
conclusions respecting the causes which, from checking the 
development of the productive powers of labour, are preju- 
dicial to the growth of wealth; and as they are rigorous 
deductions from an indisputable principle, they have only 
been assailed by individuals, either too careless to have 
thoroughly understood the principle, or of such perverted 
understandings as to be wholly incapable of seizing the 
connexion or relation between any two ideas. Whenever 
the Inquiry into the Wealth of Nations is perused with the 
attention it so well merits, it will be perceived, that until 
the epoch of its publication, the science of political economy 
did not exist. 

From this period gold and silver coins were considered 
as only constituting a portion, and but a small portion, of 
national wealth; a portion the less important, because less 
susceptible of increase, and because their uses can be more 
easily supplied than those of many other articles equally 
valuable; and hence it results that a community, as well 
as its individual members, are in no way interested in ob- 
taining metallic money beyond the extent of this limited 
demand. 

These views, we conceive, first enabled Dr. Smith to 
ascertain, in their whole extent, the true functions of money, 
and the applications of them, which he made to bank notes 
and paper money, are of the utmost importance in prac- 
tice. They afforded him the means of demonstrating, that 

* During the same year that Dr. Smith's work appeared, and immediately 
before its publication, Browne Dignan, published in London, written in the French 
language, his Essai sur les prindpes da VEconomie publique, containing the fol- 
lowing remarkable passage: "The class of reproducers includes all who, uniting 
their labour to that of the vegetative power of the soil, or modifying the produc- 
tions of nature in the processes of their several arts, create in some sort a new 
wfl/we, of which the sum total forms what is called the annual reproduction ^ 

This striking passage, in which reproduction is more clearly characterised 
than in any part of Dr. Smith's waitings, did not lead its author to any impor- 
tant conclusions, but merely gave birth to a few scattered hints. A want of 
connexion in his views, and of precision in his terms, have rendered his Essay 
so vague and obscure, that no instruction whatever can be derived from it. 



INTRODUCTION. 



xli 



productive capital does not consist of a sum of money, 
but in the value of the objects made use of in production. 
He arranged and analysed the elements of which produc- 
tive capital is composed, and pointed out their true func- 
tions.* 

Many principles strictly correct had often been ad- 
vanced prior to the time of Dr. Smith ;t he, however, was 
the first author who established their truth. Nor is this 
all. He has furnished us, also, with the true method of 
detecting errors; he has applied to political economy the 
new mode of scientific investigation, namely, of not looking 
for principles abstractedly, but by ascending from facts the 
most constantly observed, to the general laws which govern 
them. As every fact may be said to have a particular 
cause, it is in the spirit of system to determine the cause; 
it is in the spirit of analysis, to be solicitous to know why 
a particular cause has produced this effect, in order to be 
satisfied that it could not have been produced by any 
other cause. The work of Dr. Smith is a succession of 
demonstrations, which has elevated many propositions to 
the rank of indisputable principles, and plunged a still 
greater number into that imaginary gulph, into which ex- 
travagant hypotheses and vague opinions for a certain 
period struggle, before being forever swallowed up. 

It has been said that Dr. Smith was under heavy obliga- 
tions to Steuart^X an author whom he has not once quoted, 
even for the purpose of refuting him. I can not perceive 
in what these obligations consist. In the conception of 

* This difficult and abstruse subject has not, perhaps, been treated by Dr. 
Smith with sufficient method and perspicuity. Owing to this circumstance, his 
intelligent and acute countryman, lord Lauderdale, has composed an entire trea- 
tise, in order to prove that his lordship had completely failed in comprehending 
this part of the Wealth of Nations. 

t In the article Grains in the Encyclopedie, Quesnay had remarlted, that 
•'commodities, which can he sold, ought always to be considered without distinc- 
tion, either as pecuniary or real wealth, applicable to the purposes of whoever 
may make use of it." This, in reality, is Dr. Smith's exchangeable value. Dt 
Verri had observed, (chapter 3,) that reproduction was nothing more than the 
reproduction of value, and that the value of things constituted wealth. Galinni, as 
has been already noticed, had said, that labour was the source of all value; but 
Dr. Smith, nevertheless, made these views his own by exhibiting, as we see, 
their connexion with all the other important phenomena, and in dejnonstrating 
them even by their consequences. 

% Sir James Steuart, author of a Treatise on Political Economy. 

6 



Xlii INTRODUCTION. 

his subject, Dr. Smith displays the elevation and compre- 
hensiveness of his views, whilst the researches of Steuart 
exhibit but a narrow and insignificant scope. Steuart has 
supported a system already maintained by Colbert, adopted 
afterwards by all the^ French writers on commerce^ and 
steadily followed by most European governments ; a sys- 
tem which considers national wealth as depending, not 
upon the sum total of its productions, but upon the amount 
of its sales to foreign countries. One of the most important 
portions of Dr. Smith's work is devoted to the refutation 
of this theory. If he has not particularly refuted Steuart, 
it is from the latter not being considered by him as the 
father of his school, and from having deemed it of more 
importance to overthrow an opinion, then universally re- 
ceived, than to confute the doctrines of an author, which 
in themselves contained nothing peculiar. 

The economists have also pretended, that Dr. Smith was 
under obligations to them. But to what do such preten- 
sions amount? A man of genius is indebted to every thing 
around him ; to the scattered lights which he has concen- 
trated, to the errors which he has overthrown, and even 
to the enemies by whom he has been assailed; inasmuch as 
they all contribute to the formation of his opinions. But 
when out of these materials he afterwards embodies en- 
larged views, useful to his contemporaries and posterity, 
it rather behoves us to acknowledge the extent of our own 
obligations, than to reproach him with what he has been 
supplied by others. Moreover, Dr. Smith has not been 
backward in acknowledging the advantages he had derived 
from his intercourse with the most enlightened men in 
France, and from his intimate correspondence with his 
friend and countryman Hume, whose essays on political 
economy, as well as on various other subjects, contain so 
many just views. 

After having shown, as fully as so rapid a sketch will per- 
mit, the improvement which the science of pohtical econo- 
my owes to Dr. Smith, it will not, perhaps, be useless to 
indicate, in as summary a manner, some of the points on 
which he has erred, and others which he has left to be 
elucidate'd. 

To the labour of man alone he ascribes the power oL 



INTRODUCTION. xHil 

producing values. This is an error. A more exact analy- 
sis demonstrates, as will be seen in the course of this work, 
that all values are derived from the operation of labour, or 
rather from the industry of rnan, combined with the opera- 
tion of those agents which natiare and capital furnish him. 
Dr. Smith did not, therefore, obtain a thorough knowledge 
of the most important phenomenon in production; this 
has led him into some erroneous conclusions, such, for in- 
stance, as attributing a gigantic influence to the division of 
labour, or rather to the separation of employments. This 
influence, however, is by no means inappreciable or even 
inconsiderable; but the greatest wonders of this description, 
are not so much owing to any peculiar property in human 
labour, as to the use we make of the powers of nature. 
His ignorance of this principle precluded him from estab- 
lishing the true theory of machinery in relation to the I 
production of wealth. 

The phenomena of production being now better known 
than they were in the time of Dr. Smith, have enabled his 
successors to distinguish, and to assign the difference found 
to exist, between a real and a relative rise in prices ;* a 
difference which furnishes the solution of numerous prob- 
lems, otherwise wholly inexplicable. Such, for example, as 
the following : Does a tax, or any other impost, hy enhancing 
the price of commodities, increase the amount of wealth ?'\ 
The i?icome of the producer, arising from the cost of pro- 
duction, why is not this income impaired hy a diminution in 
the cost of production? Now it is the power of resolving 
these abstruse problems which, nevertheless, constitutes the 
science of political economy. J 

* See Chapter third, Book second. 

f Dr. Smith has, in a satisfactory manner, established the difference between 
the real and nominal prices of things, that is to say, between the quantity of 
real values which must be given to obtain a commodity, and the name which is 
given to the sum of these values. The difference here alluded to, arises from a 
more perfect analysis, in which the real price itself is decomposed. 

X It is not, for example, until after the manner in which production takes 
place is thoroughly understood, that we can say how far the circulation of mo- 
ney and commodities have contributed towards it, and consequently what circu- 
lation is useful and what is not; otherwise we should only talk nonsense, as is 
daily done, respecting the utility of a quick circulation. My being obliged to 
furnish a chapter on this subject (Book I, Chap. IG.) must be attributed to the 
inconsiderable advancement made in the science of political economy, and to the 
consequent necessity of directing our attention to some of its more simple appli- 




I 



Xliv INTRODUCTION. 

By the exclusive restriction of the term wealth to values 
fixed and realized in material substances, Dr. Smith has 
narrowed the boundary of this science. He should, also, 
have included under its values vrhich, although immaterial, 
are not less real, such as natural or acquired talents. Of 
two individuals equally destitute of fortune, the one in 
possession of a particular talent is by no means so poor 
as the other. Whoever has acquired a particular talent 
at the expense of an annual sacrifice, enjoys an accumu- 
lated capital; a description of wealth, notwithstanding its 
immateriality, so little imaginary, that, in the shape of 
professional services, it is daily exchanged for gold and 
silver. 

Dr. Smith, who with so much sagacity unfolds the man- 
ner in which production takes place, and the peculiar cir- 
cumstances accompanying it in agriculture and the arts, 
on the subject of commercial production presents us with 
only obscure and indistinct notions. He, accordingly, was 
unable to point out with precision, the reason why, and the 
extent to which, facilities of communication are conducive 
to production. 

He did not subject to a rigid analysis the different ope- 
rations comprehended under the general name of industry, 

cations. The same remark is applicable to the twentieth chapter, in the same 
book, on the subject oi temporary and permanent emigration, considered in refe- 
rence to national wealth. Any person, however, well acquainted with the princi- 
ples of this science, would find no difficulty in arriving at the same conclusions. 
The time is not distant when not only writers on finance, but on history and 
geography, will be required to possess a knowledge of at least the fundamental 
principles of political economy. A modern treatise on Universal Geography, 
(vol. 2, page 602) a work in other respects denoting extensive research and 
information, contains the following passage: " The number of inhabitants of a 
country is the basis of every good system of finance; the more numerous is its 
population, the greater height will its commerce and manufactures attain; and 
the extent of its military force be in proportion to the amount of its population." 
Unfortunately every one of these positions may be erroneous. National reve- 
nue, necessarily consisting either of the income of the public property, or of the 
contributions, in the shape of taxes, drawn from the incomes of individuals, does 
not depend upon the number, but upon the wealth, and above all, upon the in- 
comes of the people. Now, an indigent multitude has the fewer contributions 
to yield, the more mouths it has to feed. It is not the numerical population of 
a slate, but the capital and genius of its inhabitants, that most conduce to the 
advancement of its commerce; these benefit population much more than they are 
benefited by it. Finally, the number of troops a government can maintain de- 
pends still less upon the extent of its population than upon its revenues; and it 
has been already seen that revenue is not dependent upon population. 



•fflT' 



1 



INTRODUCTION. xlv 

or as he calls it, of labour, and, therefore, could not appre- 
ciate the peculiar importance of each in the business of 
production. 

His work does not furnish a satisfactory or well con- 
nected account of the manner in which wealth is dis- 
tributed in society; a branch of political economy, it may 
be remarked, opening an almost new field for cultivation. 
The too imperfect views of economical writers respecting 
the production of wealth precluded them from forming any 
accurate notions in relation to its distribution.* 

Finally, although the phenomena of the consumption of 
wealth are but the counterpart of its production, and 
although Dr. Smith's doctrine leads to its correct examina- 
tion, he did not himself develope it ; which precluded him 
from establishing numerous important truths. Thus, by 
not characterizing the two different kinds of consumption, 
namely, unproductive and reproductive, he does not satis- 
factorily demonstrate, that the consumption of values saved 
and accumulated in order to form capital, is as perfect as 
the consumption of values which are dissipated. The 
better we become acquainted with political economy, the 
more correctly shall we appreciate the importance of the 
improvements this science has received from him, as well 
as of those he left to be accomplished.! 

Such are the principal imperfections of the Inquiry into 
the Nature and Causes of the Wealth of Nations, in rela- 
tion to its fundamental doctrines. The plan of the work, 
or, in other words, the manner in which these doctrines are 
unfolded, is liable to no less weighty objections. 

In many places the author is deficient in perspicuity, and 
the work almost throughout is destitute of method. To 
understand him thoroughly, it is necessary to accustom 
one's self to collect and digest his views ; a labour, at least 
in respect to some passages, he has placed beyond the 
reach of most readers ; indeed, so much so, that persons 
otherwise enlightened, professing both to comprehend and 

* Witness Turgofs Reflections sur la formation et la distribution des richesses, 
in which he has introduced various views on both these subjects, either entirely 
erroneous, or very imperfect. 

I Many other points of doctrine, besides those here noticed, have been either 
overlooked or but imperfectly analysed by Dr. Smith. 



Xlvi INTRODUCTION. 

admire his doctrines, have written on subjects he has dis-- 
cussed, namely, on taxes and bank notes as supplementary 
to money, without having understood any part of hid 
theory on these points, which, nevertheless, forms one o£ 
the most beautiful portions of his inquiry. 

His fundamental principles too, are not established in 
the chapters assigned to their development. Many of them 
will be found scattered through the two excellent refuta- 
tions of the exclusive or mercantile system and the system of 
the economists^ but in no other part of the work. The prin 
ciples relating to the real and nominal prices of things, are 
introduced into a dissertation on the value of the precious 
metals during the course of the last four centuries ; and the 
author's opinions on the subject of money are contained in 
the chapter on commercial treaties. 

Dr. Smith's long digressions have, moreover, with great 
propriety, been much censured. An historical account 
of a particular law or institution as a collection of facts, 
is in itself, doubtless, highly interesting ; but in a workJ 
devoted to the support and illustration of general princi- 
ples, particular facts not exclusively applicable to these 
ends, can only unnecessarily overload the attention. His 
sketch of the progress of opulence in the different nations 
of Europe after the fall of the Roman empire, is but a 
magnificent digression. The same remark is applicable to 
the highly ingenious disquisition on pubhc education, replete 
as it is with erudition and the soundest philosophy, at the 
same time that it abounds with valuable instruction. 

Sometimes these dissertations have but a very remote 
connexion with his subject. In treating of public expendi- 
tures, he has gone into a very curious history of the 
various modes in which war was carried on by difFerenf* 
nations at different epochs j in this manner accounting for 
mihtary successes which have had so decided an influence 
on the civilization of many parts of the earth. These 
long digressions at times, also, are devoid of interest to 
every other people but the English. Of this description is 
the long statement of the advantages Great Britain would 
derive from the admission of all of her colonies into the, 
right of representation in parliament. 

The excellence of a literary composition as much 



INTRODUCTION. xlvll 

depends upon what it does not, as upon what it does con- 
tain. So many details, although in themselves useful, 
unnecessarily incumber a work designed to unfold the 
principles of political economy. Bacon made us sensible 
of the emptiness of the Aristotehan philosophy ; Smith, in 
like manner, caused us to perceive the fallaciousness of all 
the previous systems of political economy ; but the latter 
no more raised the superstructure of this science, than the 
former created logic. To both, however, our obligations 
are sufficiently great, for having deprived their successors 
of the deplorable possibility of proceeding, for any length 
of time, with success on an improper route.* 

We are, however, not yet in possession of an established 
text-book on the science of political economy, in which 
the fruits of an enlarged and accurate observation are 
referred to general principles, that can be admitted by 
every reflecting mind ; a work in which these results are 
so complete and well arranged, as to afford to each other 
mutual support, and that may every where, and at all 
times, be studied with advantage. To prepare myself for 
attempting so useful a task, I have thought it necessary 
attentively to peruse what had been previously written on 
the same subject, and afterwards to forget it; to study 
these authors, that I might profit by the experience of so 
many competent inquirers who have preceded me; to 
endeavour to obliterate their impressions, not to be misled 
by any system ; and at all times be enabled freely to con- 
sult the nature and course of things, as actually existing 
in society. Having no particular hypothesis to support, I 
have been simply desirous of unfolding the manner in 
which wealth is produced, distributed, and consumed. A 
knowledge of these facts could only be acquired by observ- 

* Since the time of Dr. Smith, both in England and France, a variety of pub- 
lications on political economy have made their appearance; some of considerable 
length, but seldom containing any thing worthy of preservation. The greater 
part of them are of a controversial character, in which the principles of the 
science are merely laid down for the purpose of maintaining a favourite hypo- 
thesis; but from which, nevertheless, many important facts, and even sound 
principles, when they coincide with the views of their authors, maybe collected. 
The " Essai sur les finances de la Grand-Bretagnc,^' by Gcnfz, an apology for 
Mr. Pitt's system of finance, is of this description; so also is Thornton''s Inquiry 
into the nature and effects of paper credit, written with a view to justify the sus- 
pension of cash payments by the bank of England; as well as a great number 
of other works on the same subject, and in relation to the corn laws. 



Xlviii INTRODUCTION. 

ing them. It is the result of these observations, within 
the reach of every inquirer, that are here given. The 
correctness of the general conclusions I have deduced from 
them, every one can judge of. 

It was but reasonable to expect from the lights of the 
age, and from that method of philosophizing which has so 
powerfully contributed to the advancement of other sci- 
ences, that I might at all times be able to ascend to the 
nature of things, and never lay down an abstract principle 
that was not immediately applicable in practice; so that, 
always compared with well established facts, any one 
could easily find its confirmation by at the same time dis- 
covering its utility. 

Nor is this all. Solid general principles, previously laid 
down, must be noticed, and briefly but clearly proved; 
those which had not been laid down must be established, 
and the whole so combined, as to satisfy every one that 
no material omission has taken place, nor any fundamental 
point been overlooked. The science must be stript of 
many false opinions; but this labour must be confined to 
such errors as are generally received, and to authors of 
acknowledged reputation. For what injury can an obscure 
writer or a discredited dogma eflfect ? The utmost preci- 
sion must be given to the phraseology we employ, so as 
to prevent the same word from ever being understood in 
two diflferent senses; and all problems be reduced to their 
simplest elements, in order to facilitate the detection of 
any errors, and above all of our own. In fine, the doctrines 
of the science must be conveyed in such a popular* form, 
that every man of sound understanding may be enabled to 
comprehend them in their whole scope and consequences, 
and apply their principles to all the various circumstances 
of life. 

The position maintained in this work, that the value of 
things is the measure of wealth, has been especially 
objected to. This, perhaps, has been my fault; I should 

* By a popular treatise, I do not mean a treatise for the use of persons, who 
neither know how to read, nor to make any use of it. By this expression, I 
mean a treatise not exclusively addressed to professional or scientific cultivators 
of this particular branch of knowledge; but one calculated to be read by every 
intelligent and useful member of society. 



INTRODUCTION. xlix 

have taken care not to be misunderstood. The only sa- 
tisfactory reply I can make to the objection, is to endea- 
vour to give more perspicuity to this doctrine. I must, 
therefore, apologize to the owners of the former editions 
for the numerous corrections I have made in the present. 
It became my duty in treating of a subject of such essen- 
tial importance to the general welfare, to give it all the 
perfection within my reach. 

Since the publications of the former editions of this work, 
various authors, some of whom enjoy a well merited cele- 
brity,* have given to the world new treatises on political 
economy. It is not my province, either to pronounce upon 
the general character of these productions, or to decide 
whether they do, or do not, contain a full, clear and well 
digested exposition of the fundamental principles of this 
science. This much I can with sincerity say, that many 
of these works contain truths and illustrations well calcu- 
lated greatly to advance the science, and from the perusal 
of which I have derived important benefit. But, in com- 
mon with every other inquirer, I am, entitled to remark 
how far some of their principles, which at first sight appear 
to be plausible, are contradicted by a more cautious and 
rigid induction of facts. 

It is, perhaps, a well founded objection to Mr. Ricardo, 
that he sometimes reasons upon abstract principles to 
which he gives too great a generalization. When once 
fixed in an hypothesis which can not be assailed, from its 
being founded upon observations not called in question, he 
pushes his reasonings to their remotest consequences, 
w^ithout comparing their results with those of actual expe- 
rience. In this respect resembling a philosophical me- 
chanician, who, from undoubted proofs drawn from the 
nature of the lever, would demonstrate the impossibility of 
the vaults daily executed by dancers on the stage. And 
how does this happen? The reasoning proceeds in a 
straight line; but a vital force, often unperceived, and 

* Ricardo, Sismondi, and others. The fair sex begin also to perceive that they 
had done themselves injustice, in supposing that they were unequal to a branch 
of study destined to exercise so benign an influence over domestic happiness. 
In England, a lady (Mrs. Marcet) has published a work, " Conversations on Po- 
litical Economy,'''' since translated into French, in which the soundest principles 
are explained in a familiar and pleasing style. 

7 



1 INTROnUCTION. 

always inappreciable, makes the facts differ very far from 
our calculations. From that instant nothing in the author's 
work is represented as it really occurs in nature. It is 
not sufficient to set out from facts ; they must be brought 
together, steadily pursued, and the consequences drawn 
from them constantly compared with the effects observed. 
The science of political economy, to be of practical utility, 
should not teach, what must necessarily take place, if even 
deduced by legitimate reasoning, and from undoubted pre- 
mises; it must show, in what manner that which in reality 
does take place, is the consequence of other facts equally 
certain. It must discover the chain which binds them 
together, and always, from observation, establish the ex- 
istence of the two links at their point of connexion. 

With respect to the wild or antiquated theories, so 
often produced or reproduced by authors who possess 
neither sufficiently extensive nor well digested information 
to entitle them to form a sound judgment, the most effec- 
tual method of refuting them is to display the true doctrines 
of the science with still greater clearness, and to leave to 
time the care of disseminating them. We, otherwise, 
should be involved in interminable controversies, affording 
no instruction to the enlightened part of society, and in- 
ducing the uninformed to believe that nothing is suscepti- 
ble of proof, inasmuch as every thing is made the subject 
of argument and disputation. 

Disputants, infected with every kind of prejudice, have, 
with a sort of doctorial confidence remarked, that both na- 
tions and individuals sufficiently well understand how to 
improve their fortunes without any knowledge of the nature 
of wealth, and that this knowledge is in itself a purely specu- 
lative and useless inquiry. This is but saying that we know 
perfectly well how to live and breathe, without any know- 
ledge of anatomy and physiology, and that these sciences 
are, therefore, superfluous. Such a proposition would not 
be tenable; but what should we say if it were maintained, 
and by a class of doctors too, who, whilst decrying the sci- 
ence of medicine, should themselves subject you to a treat- 
ment founded upon antiquated empiricism and the most 
absurd prejudices; who rejecting all regular and systematic 
instruction, in spite of your remonstrances, should perform 



INTRODUCTION. li 

upon your own body the most bloody experiments; and 
whose orders should be enforced with the weight and solem- 
nity of laws, and, finally, carried into execution by a host 
of clerks and soldiers? 

In support of antiquated errors it has, also, been said, 
" that there surely must be some foundations for opinions, 
so generally embraced by all mankind; and that we our- 
selves ought rather to call in question the observations and 
reasonings which overturn what has been hitherto so 
uniformly maintained and acquiesced in by so many indi- 
viduals, distinguished alike by their wisdom and benevo- 
lence." Such reasoning, it must be acknowledged, should 
make a profound impression on our minds, and even cast 
some doubts on the most incontrovertible positions, had we 
not alternately seen the falsest hypothesis, now universally 
recognised as such, every where received and taught during 
a long succession of ages. It is yet but a very little time, 
since the rudest as well as the most refined nations, and 
all mankind, from the unlettered peasant to the enlightened 
philosopher, believed in the existence of but four material 
elements. No human being had even dreamt of disputing 
the doctrine, which is nevertheless false; insomuch, that a 
tyro in natural philosophy, who should at present consider 
earth, air, fire, and water as distinct elements would be dis- 
graced.* How many other opinions, as universally pre- 
vaihng and as much respected, will in like manner pass 
away. There is something epidemical in the opinions of 
mankind; they are subject to be attacked by moral mala- 
dies which infect the whole species. Periods at length 
arrive when, like the plague, the disease wears itself out 
and loses all its malignity; but it still has required time. 
The entrails of the victims were consulted at Rome three 
hundred years after Cicero had remarked, that the two 
augurs could no longer examine them without laughter. 

* Every branch of knowledge, even the most important, is but of very recent 
origin. The celebrated writer on agriculture, Arthur Young, after having be- 
stowed uncommon pains in the collection of all the observations that had been 
made in relation to soils, one of the most important parts of this science, and 
which teaches us by what succession of crops the earth may be, at all times, 
and with the greatest success, cultivated, remarked, that he could not find that 
any thing had been written on this subject prior to the year 1768. Other arts, 
not less essential to the happiness and prosperity of society, are still also in 
their infancy. 



lii INTRODUCTION. 

The contemplation of this excessive fluctuation of opin- 
ions must not, however, inspire us with a behef that nothing 
is to be admitted as certain, and thus induce us to yield 
up to universal scepticism. Facts repeatedly observed by 
individuals in a situation to examine them under all their 
aspects, when once well established and accurately describ- 
ed, can no longer be considered as mere opinions, but must 
be received as absolute truths. When it was demonstrated 
that all bodies are expanded by heat, this truth could no 
longer be called in question. Moral and political science 
present truths equally indisputable, but of more difficult 
solution. In these sciences, every individual considers 
himself not only as being entitled to make discoveries but 
as being also authorized to pronounce upon the discoveries 
of others; yet how few persons acquire competent know- 
ledge, and views sufficiently enlarged, to become assured 
that the subject upon which they thus venture to pronounce 
judgment, is thoroughly understood by them in all its bear- 
ings. In society, one is astonished to find the most ab- 
struse questions as quickly decided as if every circum- 
stance, which, in any way, could and ought to affect the 
decision, were known. What would be said of a party 
passing rapidly in front of a large castle, that should under- 
take to give an account of every thing that is going on within? 

Certain individuals, whose minds have never caught a 
glimpse of a more improved state of society, boldly affirm 
that it could not exist; they acquiesce in established evils, 
and console themselves for their existence by remarking, 
that they could not possibly be otherwise; in this respect 
reminding us of that emperor of Japan who thought he 
would have suffocated himself with laughter, upon being 
told that the Dutch had no king. The Iroquois were at a 
loss to conceive how wars could be carried on with success, 
if prisoners were not to be burnt. 

Although to all appearance, many European nations may 
be in a very flourishing condition, and some of them annu- 
ally expend from one to two hundred millions of dollars 
solely for the support of the government, it must not 
thence be inferred that their situation leaves nothing to be 
desired. A rich Sybarite, residing according to his incli- 
nation, either at his castle in the country or in his palace 



INTRODUCTION. Hii 

in the metropolis, in both, at an enormous expense, partak- 
ing of every luxury that sensuality can devise, transporting 
himself with the utmost rapidity and comfort in what- 
ever direction new pleasures invite him, engrossing the 
industry and talents of a multitude of retainers and ser- 
vants, and killing a dozen horses to gratify a whim, may be 
of opinion that things go on sufficiently well, and that the 
science of political economy is not susceptible of any fur- 
ther improvement. But in countries said to be in a flour- 
ishing condition, how many human beings can be enumerat- 
ed, in a situation to partake of such enjoyments? One out 
of a hundred thousand at most; and out of a thousand, 
perhaps not one who may be permitted to enjoy what is 
called a comfortable independence. The haggardness of 
poverty is every where seen contrasted with the sleekness 
of wealth, the extorted labour of some compensating for 
the idleness of others, wretched hovels by the side of 
stately colonnades, the rags of indigence blended with the 
ensigns of opulence; in a word, the most useless profu- 
sion in the midst of the most urgent wants. 

Persons, who under a vicious order of things have 
obtained a competent share of social enjoyments, are 
never in want of arguments to justify to the eye of reason 
such a state of society ; for what may not admit of apology 
when exhibited in but one point of view ? If the same 
individuals were to-morrow required to cast anew the lots 
assigning them a place in society, they would find many 
things to object to. 

Accordingly, opinions in political economy, are not only 
maintained by vanity, the most universal of human infir- 
mities, but by self-interest, unquestionably not less so ; and 
which, without our knowledge, and in spite of ourselves, 
exercises a powerful influence over our mode of thinking. 
Hence the sharp and sour intolerance by which truth has 
been so often alarmed and obliged to retire; or which, 
when she is armed with courage, encompasses her with 
disgrace, and sometimes with persecution. Knowledge is 
at present so very generally diffused, that a philosopher 
may assert, without the risk of contradiction, that the laws 
of nature are the same in a world and in an atom ; but a 
statesman who should venture to affirm, that there is a 



liV INTRODUCTION. 

perfect analogy between the finances of a' nation and those 
of an individual, and that the same principles of economy- 
should regulate the management of the affairs of both, 
would have to encounter the clamours of various classes 
of society, and to refute ten or a dozen different systems. 

Nor is this all. Writers are found who possess the 
lamentable facihty of composing articles for journals, 
pamphlets, and even whole volumes upon subjects which, 
according to their own confession, they do not understand. 
And what is the consequence ? The science is involved in 
the clouds of their own minds, and that is rendered obscure 
which was becoming clear. Such is the indifference of the 
public, that they rather prefer trusting to assertions, than 
be at the trouble of investigating them. Sometimes, more- 
over, a display of figures and calculations imposes upon 
them ; as if numerical calculations alone could prove any 
thing, and as if any rule could be laid down, from which an 
inference could be drawn without the aid of sound reasoning. 

These are among the causes which have retarded the 
progress of political economy. 

Every thing, however, announces that this beautiful, and 
above all, useful science is spreading itself with increasing 
rapidity. Since it has been perceived, that it does not rest 
upon hypothesis, but is founded upon observation and ex- 
perience, its importance has been felt. It is now taught 
wherever knowledge is cherished. In the universities of 
Germany, of Scotland, of Spain, of Italy, and of the north 
of Europe, professorships of political economy are already 
established. Hereafter this science will be taught in them, 
with all the advantages of a regular and systematic study. 
Whilst the university of Oxford proceeds in her old and 
beaten track,* within a few years that of Cambridge has 
established a chair for the purpose of imparting instruction 
in this new science. Courses of lectures are delivered in 
Geneva and various other places; and the merchants of 

* In the year 1826, a professorship of political economy was founded at the 
university of Oxford, and a highly able and instructive course of lectures has 
since been delivered before that university, by Nassau William Senior, A. M. 
the first professor of political economy. We have rarely read a more masterly 
and entertaining performance than the professor's discussion of the mercantile 
theory of wealth, which occupies three of his lectures. 

American Editor. 






INTRODUCTION. Iv 

Barcelona have, at their own, expense, founded a professor- 
ship on pohtical economy. It is now considered as form- 
ing an essential part of the education of princes; and those 
who are called to that high distinction ought to blush at 
being ignorant of its principles. The emperor of Russia 
has desired his brothers, the grand dukes Nicholas* and 
Michael, to pursue a course of study on this subject under 
the direction of M. Storch. Finally, the government of 
France has done itself lasting honour by establishing in 
this kingdom, under the sanction of public authority, the 
first professorship of political economy. 

When the youths who are now students, shall be scat- 
tered through all the various classes of society, and elevated 
to the principal posts under government, pubhc affairs will 
be conducted in a much better manner than they hitherto 
have been. Princes as well as people, becoming more 
enlightened as to their true interests, will perceive that 
these interests are not at variance with each other ; which 
on the one side will naturally induce less oppression, and 
on the other beget more confidence. 

At present, authors who venture to write upon politics, 
history, and a/or^ion upon finance, commerce and the arts, 
without any previous knowledge of the principles of politi- 
cal economy, only produce works of temporary success, 
that do not succeed in fixing public attention. 

But what has chiefly contributed to the advancement of 
political economy, is the grave posture of affairs in the ci- 
vilized world during the last thirty years. The expenses of 
governments have risen to a scandalous height; the appeals 
which they have been obliged to make to their subjects, in 
order to relieve their exigencies, have disclosed to them 
their own importance. A concurrence of public sentiment, 
or at least the semblance of it, has been almost every 
where called for, if not brought about. The enormous 
contributions drawn from the people, under pretexts more 
or less specious, not even having been found sufficient, 
recourse has been had to loans; and to obtain credit it 
became necessary for governments to disclose their wants 
as well as their resources. Accordingly, the publicity of 
the national accounts, and the necessity of vindicating to 

* The present emperor Nicholas. 



Ivi INTRODUCTION. 

the world the acts of the administration, have in the sci- 
ence of politics produced a moral revolution, whose course 
can no longer be impeded. 

The disorders and calamities incident to the same period, 
have also produced some important experiments. The 
abuse of paper money, commercial and other restrictions, 
have made us feel the ultimate effects of almost all excesses. 
And the sudden overthrow of the most imposing bulwarks 
of society, the gigantic invasions, the destruction of old 
governments and the creation of new, the formation of 
rising empires in another hemisphere, the colonies that have 
become independent, the general impulse given to the human 
mind, so favourable to the development of all its faculties, 
and the great expectations and the great mistakes, have all 
undoubtedly very much enlarged our views; at first operat- 
ing upon men of calm observation and reflection, and sub- 
sequently upon all mankind. 

It is to the facility of tracing the links in the chain of 
causes and effects that we must ascribe the great improve- 
ment in the kindred branches of moral and political 
science; and hence it is, when once the manner in which 
political and economical facts bear upon each other is well 
understood, that we are enabled to decide what course of 
conduct will be most advantageous in any given situation. 
Thus, for example, to get rid of mendicity, that will not be 
done which only tends to multiply paupers; and, in order 
to procure abundance, the only measures calculated to pre- 
vent it will not be adopted. The certain road to national 
prosperity and happiness being known, it can and will be 
chosen. 

For a long time it was thought, that the science of poli- 
tical economy could only possibly be useful to the very 
limited number of persons engaged in the administration of 
public affairs. It is undoubtedly of importance that men 
in public life should be more enlightened than others; in 
private life, the mistakes of individuals can never ruin but 
a small number of families, whilst those of princes and 
ministers spread desolation over a whole country. But, is 
it possible for princes and ministers to be enlightened, 
when private individuals are not so ? This is a question 
that merits consideration. It is in the middling classes of 



INTRODUCTION. Ivii 

society, equally secure from the intoxication of power and 
the compulsory labour of indigence, in which are found 
moderate fortunes, leisure united Avith habits of industry, 
the free intercourse of friendship, a taste for literature, and 
the ability to travel, that knowledge originates, and is dis- 
seminated amongst the highest and lowest orders of the 
people. For these latter classes, not having the leisure 
necessary for meditation, only adopt truths when presented 
to them in the form of axioms, requiring no further demon- 
stration. 

And although a monarch and his principal ministers 
should be well acquainted with the principles upon which 
national prosperity is founded, of what advantage would 
this knowledge be to them, if throughout all the different 
departments of administration, their measures were not 
supported by men capable of comprehending and enforcing 
them? The prosperity of a city or province is sometimes 
dependent upon the official acts of a single individual; and 
the head of a subordinate department of government, by pro- 
voking an important decision, often exercises an influence 
even superior to that of the legislator himself. In coun- 
tries blessed with a representative form of government, 
each citizen is under a much greater obligation to make 
himself acquainted with the principles of political economy; 
for there every man is called upon to deliberate upon pub- 
lic affairs. 

Finally, in supposing that every person in any way con- 
nected with government, from the highest to the lowest, 
could be well acquainted with these principles, without the 
nation at large being so, which is wholly improbable, what 
resistance would not the execution of their wisest plans 
experience? What obstacles would they not encounter in 
the prejudices of those even, who should most favour their 
measures? 

A nation, in order to enjoy the advantages of a good 
system of political economy, must not only possess states- 
men capable of adopting the best plans, but the population 
must be in a situation to admit of their application.* 

* I here suppose the higher orders of society to be actuated by a sincere desire 
to promote the public good. When this feeling, however, does not exist, when 
the government is faithless and corrupt, it is of still greater importance that the 
people should become acquainted with the real state of things, and comprehend 

8 



Iviii INTRODUCTION. 

It is also the way of avoiding doubts and perpetual 
changes of principles, which prevents our profiting even from 
whatever may be good in a bad system. A steady and 
consistent policy is an essential element of national pros- 
perity; thus England has become more opulent and powerful 
than would seem to comport with her territorial extent, by 
an uniform and steadfast adherence to a system, even in 
many respects objectionable to her, of monopolizing the 
maritime commerce of other nations. But to follow for 
any length of time the same route, it is necessary to be able 
to choose one not altogether bad; unforeseen and insur- 
mountable difficulties would otherwise have to be encoun- 
tered, which would oblige us to change our course, without 
even the reproach of versatility. 

It is, perhaps, to this cause we must attribute the evils 
which, for two centuries, have tormented France; a pe- 
riod during which she was within reach of that state of 
high prosperity she was invited to by the fertility of her 
soil, her geographical position and the genius of her in- 
habitants. With no fixed opinions in relation to the 
causes of public prosperity, the nation, like a ship without 
chart or compass, was driven about by the caprice of the 
winds and the folly of the pilot, ahke ignorant of the place 
of her departure or destination.* A consistent policy in 
France would have extended its influence over many suc- 
cessive administrations; and the vessel of the state would at 
least not have been in danger of being wrecked, or exposed 
to the awkward manoeuvres by which she has so much 
suffered. 

Versatility is attended with such ruinous consequences, 
that it is impossible to pass even from a bad to a good 
system without serious inconvenience. The exclusive and 
restrictive system is without doubt vastly injurious to the 

their true interests. Otherwise, they suffer without knowing to what causes 
their distresses ought to be attributed; or indeed, by attributing them to erro- 
neous causes, the views of the public are distracted, their efforts disunited, and 
individuals, thus deprived of general support, fail in resolution, and despotism 
is strengthened; or what is still worse, where the people are so badly governed 
as to become desperate, they listen to pernicious counsels, and exchange a vicious 
order of things for one still worse. 

* In how many instances have not great pains been taken and considerable 
capital expended to increase the evils mankind have been desirous of shunning. 
How many regulations, are just so far carried into execution as to produce all 
the injury restrictions possibly can effect, and, at the same time, just as far vio- 
lated as to retain all the inconveniences arising from their infringement? 



INTRODUCTION. Ux 

development of industry and to the progress of national 
wealth; nevertheless, the establishments which this pohcy 
has created could not be suddenly suppressed, without 
causing great distress.* A more favourable state of things 
can only be brought about, without any inconvenience, by 
the gradual adoption of measures introduced with infinite 
skill and care. A traveller whose limbs have been frozen 
in traversing the Arctic regions, can only be preserved 
from the dangers of a too sudden cure and restored to 
entire health, by the most cautious and imperceptible 
remedies. 

The soundest principles are not at all times applicable. 
The essential object is to know them, and then such as 
are applicable or desirable can be adopted. There can be 
no doubt that a new community, which in every instance 
should consult them, would rapidly reach the highest pitch 
of opulence; but every nation may, nevertheless, in many 
respects violate them and yet attain a satisfactory state of 
prosperity. The powerful action of the vital principle 
causes the human body to grow and thrive in spite of the 
accidents and excesses of youth, or of the wounds which 
have been inflicted on it. Absolute perfection, beyond which 
all is evil and produces only evil, is no where found; evil 
is every where mixed with good. When the former pre- 
ponderates, society declines; when the latter, it advances 
with more or less rapidity in the road of prosperity. 
Nothing, therefore, ought to discourage our efforts towards 
the acquisition and dissemination of sound principles. 
The least step taken tovvards the attainment of this know- 
ledge is immediately productive of some good, and ulti- 
mately will yield the happiest fruits. 

If, for the interest of the state, it is important that indi- 
viduals should know what are the true principles of politi- 
cal economy, who will venture to maintain that the same 
knowledge will be useless to them in the management of 
their own private concerns ? That money is readily earned 
without any knowledge of the nature or origin of wealth, I 
admit. For that purpose, a very simple calculation, within 

* This arises from our not being able, without serious losses, to displace the 
capital and talents, which, owing to an erroneous system, have received a faulty 
direction. 



Ix INTRODUCTION. 

the reach of the rudest peasant, is all that is necessary: 
such an article will, including every expense, cost me so much; 
I shall sell it for so much, and, therefore, shall gain so much. 
Nevertheless, accurate ideas respecting the nature and 
growth of wealth, unquestionably afford us many ad- 
vantages in forming a sound judgment of enterprises in 
which we are interested, either as principals or as parties. 
They enable us to foresee what these enterprises will re- 
quire, and what will be their results; to devise the means 
of their success and to establish our exclusive claims to 
them; to select the most secure investments, from antici- 
pating the effects of loans and other public measures; to 
cultivate the earth to advantage, from accurately adjusting 
actual advances with probable returns: to become ac- 
quainted with the general wants of society, and thus be 
enabled to make choice of a profession: and to discern 
the symptoms of national prosperity or decline. 

The opinion that the study of the science of political 
economy is calculated to be useful to statesmen only, falla- 
cious as it is, has been attended with other disadvantages. 
Almost all the authors on this subject, until the time of 
Dr. Adam Smith, had imagined that their principal object 
was to enlighten the public authorities; and as they were 
far from agreeing among themselves, inasmuch as the facts 
and their connexion and consequences were but imperfectly 
known to them, and entirely overlooked by the multitude, 
it is by no means surprising that they should have been re- 
garded as visionary dreamers in relation to the public good. 
Hence the contempt which men in power always affect 
towards every thing like first principles. 

But since the rigorous method of philosophising, which 
in every other branch of knowledge leads to truth, has 
been applied to the investigation of facts, and to the rea- 
sonings founded on them, and the science of political econ- 
omy has been thus confined to a simple exposition of what- 
ever takes place in relation to wealth, it no longer attempts 
to offer counsel to public authorities. Should they, how- 
ever, be desirous of ascertaining the good or evil conse- 
quences likely to result from any favourite project, they 
may consult this science, exactly as they would consult 
hydraulics upon the construction of a pump or sluice. 



INTRODUCTION. 1x1 

All that can be required from political economy is to fur- 
nish governments with a correct representation of the 
nature of things, and the general laws necessarily resulting 
from it. Perhaps, until such views be more generally 
difiused, it may also be required, to point out to them 
some of the applications of its principles. Should these 
be despised or neglected, the governments themselves, as 
well as the people, will be the sufferers. The husbandman 
who sows tares can never expect to reap wheat. 

Certainly, if political economy discloses the sources of 
wealth, points out the means of rendering it more abundant, 
and teaches the art of daily obtaining a still greater amount 
without ever exhausting it; if it demonstrates, that the 
population of a country may, at the same time, be more 
numerous and better supplied with the necessaries of life; 
if it satisfactorily proves that the interest of the rich and 
poor, and of different nations, are not opposed to each 
other, and that all rivalships are mere folly ; and if from all 
these demonstrations it necessarily results, that a multi- 
tude of evils supposed to be without remedy, may not only 
be said to be curable, but even easy to cure, and that we need 
not suffer from them any longer than we are willing so to 
do; it must be acknowledged that there are few studies of 
greater importance, or more deserving the attention of an 
elevated and benevolent mind. 

Time is the great teacher, and nothing can supply its 
operation. It alone can fully demonstrate the advantages 
to be derived from a knowledge of political economy in the 
general principles of legislation and government. On the 
one hand, the custom which condemns so many men of 
sense, at the same time that they admit the principles of 
this science, to speak and act as if they were wholly igno- 
rant of them,* and on the other, the resistance, which 

♦ " They would wish, so to express myself, that I might be able to demon- 
strate that my proofs are conclusive, and that they are not wrong in submitting 
to them. The soundness of my reasoning has produced a momentary convic- 
tion; but they afterwards feel the habitual influence of their former opinions 
return with undiminished authority, although without any adequate cause, as in 
the case of the apparent increase in the diameter of the moon at the horizon. 
They would wish to be freed by me from these troublesome relapses, of whose 
delusiveness they are sensible, but which nevertheless importune them. In a 
word, they are desirous, that 1 should be enabled to effect by reason what time 
alone can accomplish; which is impossible. Every cause has an effect peculiar 



Ixii INTRODUCTION. 

individual as well as general interests, imperfectly under- 
stood, oppose to many of these principles, exhibit nothing 
that ought either to surprise or alarm individuals animated 
with a desire of promoting the general welfare. The phi- 
losophy of Newton, which during a period of fifty years 
was unanimously rejected in France, is now taught in all 
its schools. Ultimately it will be perceived, that there are 
studies of still greater importance than this, if estimated 
by their influence on the happiness and prosperity of man- 
kind. 

Still how unenlightened and ignorant are the very nations 
we term civilized ! Survey entire provinces of proud Europe ; 
interrogate a hundred, a thousand, or even ten thousand in- 
dividuals, and of this whole number, you will hardly, per- 
haps, find two embued with the slightest tincture of the im- 
proved science of which the present age so much boasts. 
This general ignorance of recondite truths is by no means so 
remarkable as an utter unacquaintance with the simplest 
rudiments of knowledge applicable to the situation and cir- 
cumstances of every one. How rare, also, are the qualifica- 
tions necessary for one's own instruction, and how few 
persons are solely capable of observing what daily happens, 
and of questioning whatever they do not understand? 

The highest branches of knowledge are then very far 
from having yielded to society all the advantages to be 
expected from them, and without which they would be 
merely curious speculations. Perhaps their perfect appli- 
cation is reserved for the nineteenth century. In moral as 
well as in physical science, inquirers of superior minds will 
appear, who after having extended their theoretical views, 
will disclose methods of placing important truths within the 
reach of the humblest capacities. In the ordinary occur- 
rences of life, instead of then being guided by the false 
lights of a transcendental philosophy, mankind will be 
governed by the maxims of common sense. Opin- 
ions will not rest on gratuitous assumptions, but be the 

to itself. Reason may convince, opinions carry us along, and illusions perplex 
us; but time alone and the frequent repetition of the same acts, can produce that 
state of calmness and ease which we call habit. Hence it is, that all new opi- 
nions are such a length of time in spreading themselves. If an innovator has 
ever had immediate success, it is only from having discovered and promulgated 
opinions already floating in every mind." Destutt-Tracy, Logigue, chap. 8. 



INTRODUCTION. 



Ixiii 



result of an accurate observation of the nature of things. 
Thus, habitually and naturally ascending to the source of 
all truth, we shall not suffer ourselves to be imposed upon 
by empty sounds, or submit to the guidance of errone- 
ous impressions. Corruption, deprived of the weapons of 
empiricism, will lose her principal strength, and no longer 
be able to obtain triumphs, calamitous to honest men and 
disastrous to nations. 



BOOK I. 

OF THE PRODUCTION OF WEALTH. 



CHAPTER I. 

OF WHAT IS TO BE UNDERSTOOD BY THE TERM, PRODUCTION. 

If we take the pains to inquire what that is, which mankind in a 
social state of existence denominate wealth, we shall find the term 
employed to designate an indefinite quantity of objects bearing 
inherent value, as of land, of metal, of coin, of grain, of stuff's, of 
commodities of every description. When they further extend its 
signification to landed securities, bills, notes of hand, and the like, it 
is evidently because they contain obligations to deliver things pos- 
sessed of inherent value. In point of fact, wealth can only exist 
where there are things possessed of real and intrinsic value. 

Wealth is proportionate to the quantum of that value; great, when 
the aggregate of component value is great; small, when that aggre- 
gate is small. 

The value of a specific article is always vague and arbitrary, so 
long as it remains unacknowledged. Its owner is not a jot the richer, 
by setting a higher ratio upon it in his own estimation. But the 
moment that other persons are willing, for the purpose of obtaining 
it, to give in exchange a certain quantity of other articles, likewise 
bearing value, the one may then be said to be worth, or to be ot 
equal value with, the other. 

The quantity of money, which is readily parted with to obtain a 
thing, is called its price. Current price, at a given time and place, 
is that price which the owner is sure of obtaining for a thing, if he 
is inclined to part with it* 

The knowledge of the real nature of wealth, thus defined, of the 
diflSculties that must be surmounted in its attainment, of the course 
and order of its distribution amongst the members of society, of the 

* The numerous and difficult points arising out of the confusion oi positive and 
relative value are discussed in diflferent parts of this work: particularly in the 
leading chapters of Book II. Not to perplex the attention of the reader, I confine 
rayselt here to so much as is absolutely necessary to comprehend the phenome- 
non of the production of wealth. 
9 



66 ON PRODUCTION. book i. 

uses to which it may be applied, and, further, of the consequences 
resulting respectively from these several circumstances, constitutes 
that branch of science now entitled political economy. 

The value that mankind attach to objects originates in the use It 
can make of them. Some afford sustenance; others serve for cloth- 
ing; some defend them from the inclemencies of the season, as houses; 
others gratify their taste, or, at all events, their vanity, both of which 
are species of wants: of this class are all mere ornaments and deco- 
rations. It is universally true, that, where men attribute value to 
any thing, it is in consideration of its useful properties: what is good 
for nothing they set no price upon.^ To this inherent fitness or 
capability of certain things to satisfy the various wants of mankind, 
I shall take leave to affix the name of utility. And I will go on to 
say, that, to create objects which have any kind of utility, is to create 
wealth; for the utility of things is the ground-work of their value, 
and their value constitutes wealth. 

Objects, however, cannot be -created by human means; nor is the 
mass of matter, of which this globe consists, capable of increase or 
diminution. All that man can do is, to re-produce existing materials 
under another form, which may give them an utility they did not 
before possess, or merely enlarge one they may have before present- 
ed. So that, in fact, there is a creation, not of matter, but of utility; 
and this I c?\\ production of wealth. 

In this sense, then, the word production must be understood in 
political economy, and throughout the whole course of the present 
work. Production is the creation, not of matter, but of utility. It 
is not to be estimated by the length, the bulk, or the weight of the 
product, but by the utility it presents. 

Although price is the measure of the value of things, and their 
value the measure of their utility, it would be absurd to draw the 
inference, that, by forcibly raising their price, their utility can be 
augmented. Exchangeable value, or price, is an index of the recog- 
nised utility of a thing, so long only as human dealings are exempt 
from every influence but that of the identical utility: in like manner 
as a barometer denotes the weight of the atmosphere, only while the 
mercury is submitted to the exclusive action of atmospheric gravity. 

In fact, when one man sells any product to another, he sells him 
the utility vested in that product; the buyer buys it only for the sake 
of its utility, of the use he can make of it. If, by any cause what- 
ever, the buyer is obliged to pay more than the value to himself of 

* It would be out of place here to examine, whether or no the value mankind 
attach to a thing be always proportionate to its actual utility. The accuracy of 
the estimate must depend upon the comparative judgment, intelligence, habits, 
and prejudices of those who make it. True morality, and the clear perception 
of their real interests, lead mankind to the just appreciation of benefits. Politi- 
cal economy takes this appreciation as it finds it — as one of the data of its rea- 
sonings ; leaving to the moralist and the practical man, the several duties of 
enlightening and of guiding their fellow creatures, as well in this, as in other 
particulars of human conduct. 



CHAP. I. ON PRODUCTION. 67 

that utility, he pays for value that has no existence, and consequent- 
ly which he does not receive.* 

This is precisely the case, when authority grants to a particular 
class of merchants the exclusive privilege of carrying on a certain 
branch of trade, the India trade for instance; the price of Indian 
imports is thereby raised, without any accession to their utility or 
intrinsic value. This excess of price is nothing more or less than so 
much money transferred from the pockets of the consumers into 
those of the privileged traders, whereby the latter are enriched ex- 
actly as much as the former are unnecessarily impoverished. In 
like manner, when a government imposes on wine a tax, which 
raises to 15 cents the bottle what would otherwise be sold for 10 
cents, what does it else, but transfer 5 cents per bottle from the hands 
of the producers or the consumers of wine to those of the tax-gather- 
er .'t The particular commodity is here only the means resorted to 
for getting at the tax-payer with more or less convenience; and its 
current value is composed of two ingredients, viz. I. Its real value 
originating in its utility: 2. The value of the tax that the govern- 
ment thinks fit to exact, for permitting its manufacture, transport, or 
consumption. 

Wherefore, there is no actual production of wealth, without a 
creation or augmentation of utility. Let us see in what manner this 
utility is to be produced. 



CHAPTER II. 

OF THE DIFFERENT KINDS OF INDUSTRY, AND THE MODE IN WHICH 
THEY CONCUR IN PRODUCTION. 

Some items of human consumption are the spontaneous gifts' of 
nature, and require no exertion of man for their production; as air, 
water, and light, under certain circumstances. These are destitute 
of exchangeable value: because the want of them is never felt, others 
being equally provided with them as ourselves. Being neither pro- 
curable by production, nor destructible by consumption, they come 
not within the province of political economy. 

But there are abundance of others equally indispensable to our 
existence and to our happiness, which man would never enjoy at all, 
did not his industry awaken, assist, or complete the operations of 

* This position will hereafter be further illustrated. For the present it is 
enough to know, that, whatever be the state of society, current prices approxi- 
mate to the real value of things, in proportion to the liberty of production and 
mutual dealing. 

t It will be shown in Book III. of thilKvork, what proportion of the tax is 
paid by the producer, and what by the consumer. 



68 ON PRODUCTION. book i. 

nature. Such are most of the articles which serve for his food, rai- 
ment and lodging. 

When that industry is limited to the bare collection of natural 
products, it is called agricultural industry, oy simply agriculture. 

When it is employed in severing, compounding, or fashioning the 
products of nature, so as to fit them to the satisfaction of our various 
wants, it is called Tnanufacturing industry. * 

When it is employed in placing within our reach objects of want 
which would otherwise be beyond reach, it is called commercial 
industry, or simply commerce. 

It is solely by means of industry that mankind can be furnished, 
in any degree of abundance, with actual necessaries, and with that 
variety of other objects, the use of which, though not altogether in- 
dispensable, yet marks the distinction between a civilized communi- 
ty and a tribe of savages. Nature, left entirely to itself, would pro- 
vide a very scanty subsistence to a small number of human beings. 
Fertile but desert tracts have been found inadequate to the bare 
nourishment of a few wretches, cast upon them by the chances of 
shipwreck: while the presence of industry often exhibits the spec- 
tacle of a dense population plentifully supplied upon the most un- 
grateful soil. 

The term products is applied to things that industry furnishes to 
mankind. 

A particular product is rarely the fruit of one branch of industry 
exclusively. A table is a joint product of agricultural industry, 
which has felled the tree whereof it is made, and of manufacturing 
industry, which has given it form. Europe is indebted for its coffee 
to the agricultural industry, which has planted, and cultivated the 
bean in Arabia or elsewhere, and to the commercial industry, which 
hands it over to the consumer. 

These three branches of industry, which may at pleasure be again 
infinitely subdivided, are uniform in their mode of contributing to 
the act of production. They all either confer an utility on a sub- 
stance that possessed none before, or increase one which it already 
possessed. The husbandman who sows a grain of wheat that yields 
twenty-fold, does not gain this product from nothing: he avails him- 
self of a powerful agent; that is to say, of Nature, and merely directs 
an operation, whereby different substances previously scattered 
throughout the elements of earth, air, and water, are converted into 
the form of grains of wheat. 

Gall-nuts, sulphat of iron, and gum-arabic, are substances existing 

separately in nature. The joint industry of the merchant and manu- 

. facturer brings them together, and from their compound derives the 

black liquid, applied to the transmission of useful science. This 

joint operation of the merchant and manufacturer is analogous to that 

* Since matter can only be modified, compounded, or separated, by means 
either mechanical or chemical, all branches of manufacturing industry may be 
subdivided into the mechanical and tlft chemical arts, according to the predomi- 
nance of the one or the other in their several processes. 



CHAP. II. ON PRODUCTION. 69 

of the husbandman, who chooses his object and effects its attainment 
by precisely the same kind of means as the other two. 

No human being has the faculty of originally creating matter, 
which is more than nature itself can do. But any one may avail 
himself of the agents offered him by nature, to invest matter with 
utility. In fact, industry is nothing more or less than the human 
employment of natural agents; the most perfect product of labour, 
the one that derives nearly its whole value from its workmanship, is 
probably the ^result of the action of steel, a natural product upon 
some substance or other, likewise a natural product.* 

Through ignorance of this principle, the economists of the 18th 
century, though many enlightened writers were to be reckoned 
amongst them, were betrayed into the most serious errors. They 
allowed no industry to be productive, but that which procured the 
raw materials; as the industry of the husbandman, the fisherman and 
the miner; not adverting to the distinction, that wealth consists, not 
in matter, but in the value of matter; because matter without value 
is no item of wealth; otherwise water, flint-stones, and dust of the 
roads, would be wealth. Wherefore, if the value of matter consti- 
tutes wealth, wealth is to be created by the annexation of value. 
Practically, the man who has in his warehouse a quintal of wool 
worked up into fine cloths^ is richer than one who has the same 
quantity of wool in packs. 

To this position the economists replied, that the additional value 
communicated to a product by manufacture, was no more than equi- 
valent to the value consumed by the manufacturer during the process; 
for, said they, the competition of manufactures prevents their ever 
raising the price beyond the bare amount of their own expenditure 
and consumption; wherefore their labour adds nothing to the total 
wealth of the community, because their wants on the one side destroy 
as much as their industry produces on the other.t 

* Alagrotti in his Opuscula, by the way of exemplifying the prodigious addi- 
tion of the value given to an object by industry, adduces the spiral springs that 
check the balance-wheels of watches, A pound weight of pig-iron costs the 
operative manufacturer about five cents. This is worked up into steel, of which is 
made the little spring that moves the balance-wheel of a watch. Each of these 
springs weighs but the tenth part of a grain ; and when completed, may be sold 
as high as three dollars, so that out of a pound of iron, allowing something for 
the loss of metal, 80,000 of these springs may be made, and a substance of five 
cents value be wrought into a value of 240,000 dollars. 

■j" Mercier de la Riviere, in his work entitled Ordre Naturel des Societes Politi- 
ques,^'' torn. ii. p. 255, while labouring to prove, that manufacturing labour is 
barren and unproductive, makes use of an argument, which I think it may be of 
some service to refute, because it has been often repeated in different shapes, 
and some of them specious enough. He says, "that if the unreal products of 
industry are considered as realities, it is a necessary inference, that an useless 
multiplication of workmanship is a multiplication of wealth." But because 
human labour is productive of value, when it has an useful result, it by no means 
follows, that it is productive of value, when its result is either useless or injuri- 
ous. All labour is not productive; but such only as adds a real value to any 
substance or thing. And the futility of this argument of the economists is put 



70 ON PRODUCTION. book i. 

But it should have been previously demonstrated by those who 
made use of this argument, that the value, consumed by mechanics 
and artizans, must of necessity barely equal the value produced by 
them, which is not the fact; for it is unquestionable, that more savings 
are made, and more capital accumulated from the profits of trade and 
manufacture, than from those of agriculture. (1). 

Besides, even admitting that the profits of manufacturing industry 
are consumed in the satisfaction of the necessary wants of the manu- 
facturers and their families, that circumstance does* not prevent 
them being positive acquisitions of wealth. For unless they were 
so, they could not satisfy their wants: the profits of the land-owner 
and agriculturist are allowed to be items of positive wealth; yet they 
are equally consumed in the maintenance of those classes. 

Commercial, in like manner as manufacturing industry, concurs in 
production, by augmenting the value of a product by its transport 
from one place to another. A quintal of Brazil cotton has acquired 
greater utility, and therefore larger value, by the time it reaches a 
warehouse in Europe, than it possessed in one at Pernambuco. The 
transport is a modification that the trader gives to the commodity, 
whereby he adapts to our use what was not before available; which 
modification is equally useful, complex and uncertain in the result 
as any it derives from the other two branches of industry. He 
avails himself of the natural properties of the timber and the metals 
used in the construction of his ships, of the hemp whereof his rigging 
is composed, of the wind that fills his sails, of all the natural agents 
brought to concur in his purpose, with precisely the same view and 
the same result, and in the same manner too, as the agriculturist 
avails himself of the earth, the rain, and the atmosphere.* 

beyond all question by the circumstance, that it may be equally employed 
against their own system and that of their opponents. They may be told, " You 
admit the industry of the cultivator to be productive ; therefore he has only to 
plough and sow his fields ten times a year to increase his productiveness ten- 
fold," which is absurd. 

* Genovesi, who lectured on political economy at Naples, defines commerce 
to be " the exchange of superfluities for necessaries." He gives as his reason, 
that in every transaction of exchange, the article received appears to each of the 
contracting parties more necessary than that given. This is a far-fetched notion, 
which I think myself called on to notice, because it has obtained considerable 
currency. It would be difficult to prove, that a poor labourer, who goes to the 

(1) [Our author, in here asserting, " that more savings are made, and more 
capital accumulated from the profits of trade and manufactures, than from those 
of agriculture," has fallen into an error, which it is proper to notice. In the 
absence of prohibitions and restraints, the profits of agriculture, manufactures 
and commerce, will all be on an equality, or always nearly approaching towards 
it; for any material difference will cause a diversion of capital and industry to 
the more productive channel, and by that means restore the equilibrium. In 
overthrowing the hypothesis of the economists, the author has inadvertently, for 
a moment, lost sight of his own general principles, which so clearly establish 
the equality of profits in all the different branches of industry.] 

American Editor. 



CHAP. II. ON PRODUCTION. 71 

Thus, when Raynal says of commerce, as contrasted with agricul- 
ture and the arts, that "it produces nothing of itself," he shows him- 
self to have had no just conception of the phenomenon of production. 
In this instance Raynal has fallen into the same error with regard to 
commerce, as the economists made respecting both commerce and 
manufacture. They pronounced agriculture to be the sole channel 
of production; Raynal refers production to the two channels of agri- 
culture and manufacture: his position is nearer the truth than the 
other, but still is erroneous. 

Condillac also is confused in his endeavour to explain the mode in 
which commerce produces. He pretends that, because all commo- 
dities cost to the seller less than the buyer, they dei'ive an increase 
of value from the mere act of transfer from one hand to another. 
But this is not so : for, since a sale is nothing else but an act of barter, 
in which one kind of goods, silver for example, is received in lieu 
of another kind of goods, the loss which either of the parties dealing 
should sustain on one article would be equivalent to the profit he 
would make on the other, and there would be to the community no 
production of value whatsoever.* When Spanish wine is bought at 
Paris, equal value is really given for equal value: the silver paid, 
and the wine received, are worth one the other; but the wine had not 
the same value before its export from Alicant: its value has really 
increased in the hands of the trader, by the circumstance of trans- 
port, and not by the circumstance, or at the moment, of exchange. 

alehouse on a Sunday, exchanges there his superfluity for a necessary. In all 
fair tratfic, there occurs a mutual exchange of two things, which are worth one 
the other, at the time and place of exchange. Commercial production, that is 
to say, the value added by commerce to the things exchanged, is not operated by 
the act of exchange, but by the commercial operations that precede it. 

The Count de Verri is the only writer within my knowledge, who has explain- 
ed the true principle and ground-work of commerce. In the year 1771, he 
thus expresses himself: " Commerce is in fact nothing more than the transport 
of goods from one place to another." {Meditazioni sulla economia politico, § 4.) 
The celebrated Adam Smith himself appears to have had no very clear idea of 
commercial production. He merely discards the opinion, that there is any pro- 
duction of value in the act of exchange. 

* This circumstance had escaped the attention of Sismondi, or he would not 
have said, "The trader places himself between the producer and the consumer, 
to benefit them both at once, making his charge for that benefit upon both." (Nou- 
veaux Principes d^Economie Pol. Liv. ii. ch. 8). He would make it appear as 
if the trader subsisted wholly upon the value produced by the agriculturist and 
the manufacturer ; whereas he is maintained by the real value he himself com- 
municates to comniodities by giving them an additional modification, an useful 
property. It is this very notion that stirs up the popular indignation against the 
dealers in grain. 

L. Say, of Nantes, has fallen into the same mistake {Principales Causes de la 
Richesse, &,c. p. 110). By way of demonstrating the value conferred by com- 
merce to be unreal, he alleges it to be absorbed by the charges of transport. By 
this incidental process of reasoning, the economists concluded manufacture to be 
improductive ; not perceiving, that in these very charges consists the revenue of 
the commercial and manufacturing producers ; and that it is in this way that 
the values raised by production at large are distributed amongst the several pro- 
ducers. 



72 ON PRODUCTION. book i. 

The seller does not play the rogue, nor the buyer the fool; and Con- 
dillac has no grounds for his position, that " if men always exchang- 
ed equal value for equal value, there would be no profit to be made 
by the traders."* 

In some particular cases the two other branches of industry pro- 
duce in a manner analogous to commerce, viz. by giving a value to 
things to which they actually communicate no new quality, but that 
of approximation to the consumer. Of this description is the indus- 
try of miners. The coal or metal may exist in the earth, in a perfect 
state, but unpossessed of value. The miner extracts them thence, 
and- this operation gives them a value, by fitting them for the use of 
mankind. So also of the herring fishery. Whether in or out of 
the sea the fish is the same; but under the latter circumstances, it 
has acquired an utility, a value, it did not before possess.t 

Examples might be infinitely multiplied, and would all bear as 
close an afiinity, as those natural objects, which the naturalist classi- 
fies only to facilitate their description. 

This fundamental error of the economists, in which I have shown 
that their adversaries in some measure participated, led them to the 
strangest conclusions. According to their theory, the traders and 
manufacturers, being unable to add an iota to the general stock of 
wealth, live entirely at the expense of the sole producers, that is to 
say, the proprietors and cultivators of the land. Whatever new 
value they may communicate to things, they at the same time con- 
sume an equivalent product, furnished by the real producers: manu- 
facturing and commercial nations, therefore, subsist wholly upon the 
wages they receive from their agricultural customers; in proof of 
which position, they alleged that Colbert ruined France by his pro- 
tection of manufactures, &c.t 

The truth is, that, in whatever class of industry a person is enr 
gaged, he subsists upon the profit he derives from the additional 

* See his work entitled, " Le Commerce ef le Gouvernment consideres relative- 
ment Pun a Pautre." Ire. partie, ck. 6. 

f We may consider as agents of the same class of industry, the cultivator of 
the land, the breeder of cattle, the woodcutter, the fisherman that takes fish he 
has been at no pains in breeding, and the miner who, from the bowels of the 
earth, extracts metal, stone, or combustibles, that nature has placed there in a 
perfect state; and, to avoid multiplicity of denominations, the whole of these 
occupations may be called by the name of agricultural industry, because the 
superficial cultivation of the earth, is the chief and most important of all. Terms 
are of little consequence, when the ideas are clear and definite. The wine grower, 
who himself expresses the juice of his grapes, performs a mechanical operation, 
that partakes more of manufacture than of agriculture. But it matters little 
whether he be classed as a manufacturer or agriculturist ; provided that it be 
clearly comprehended in what manner his industry adds to the value of the pro- 
duct. If we wish to give separate consideration to every possible manner of 
giving value to things, industry may be infinitely subdivided. If it be the object 
to generalize to the utmost, it may be treated as one and the same; for every 
branch of it will resolve itself into this : the employment of natural substances 
and agents in the adaptation of products to human consumption. 

X See the numberless writings of that sect. 



CHAP. II. ON PRODUCTION. 73 

value, or portion of value, no matter in what ratio, which his agency 
attaches to the product he is at work upon. The total value of pro- 
ducts serves in this way to pay the profits of those occupied in pro- 
duction. The wants of mankind are supplied and satisfied out of 
the gross values produced and created, and not out of the net values 
only^ 

^A nation, or a class of a nation, engaged in manufacturing or com- 
mercial industry, is not a whit more or less in the pay of another, 
than one employed in agriculture. The value created by one branch 
is of the same nature as that created by the others. Two equal 
values are worth one the other, although perhaps the fruit of differ- 
ent branches of industry: and when Poland barters its staple product, 
wheat, for the staple commodity of Holland, East and West India 
produce, Holland is no more in the pay or service of Poland, than 
Poland is of Holland. 

Nay, Poland herself, which exports at the rate of ten millions of 
wheat annually, and therefore, according to the economists, takes the 
sure road to national wealth, is, notwithstanding, poor and depopu- 
lated: and why? — Because she confines her industry to agriculture, 
though she might be at the same time a commercial and manufactur- 
ing state. Instead of keeping Holland in her pay, she may with 
more propriety be said to receive wages from the latter, for the 
raising of ten millions of wheat per annum. Nor is she a jot less 
dependent than the nations that buy wheat of her: for she has just 
as much desire to sell to them, as they have to buy of her.* 

Moreover, it is not true that Colbert ruined France. On the con- 
trary, the fact is that France, under Colbert's administration, emerged 
from the distress that two regencies and a weak reign had involved 
her in. She was, indeed, afterwards ruined again; but for this second 
calamity, she may thank the pageantry and the wars of Louis XIV. 
Nay, the very prodigality of that prince is an undeniable evidence 
of the vast resources that Colbert had placed at his disposal. It must, 
however, be admitted that those resources would have been still 
more ample, if he had but given the same protection to agriculture, 
as to the other branches of industry. 

Thus it is evident, that the means of enlarging and multiplying 
wealth within the reach of every community are much less confined 
than the economists imagined. A nation, by their account, was un- 
able to produce annually any values beyond the net annual produce 
of its lands; to which fund alone recourse could be had for the sup- 
port, not only of the proprietary and the idler, but likewise of the 
merchant, the manufacturer, and the mechanic, as well as for the total 
consumption of the government. Whereas we have just seen, that 
the annual produce of a nation is composed, not of the mere netpro- 

♦ We sliall find in the sequel, that, if any one nation can be said to be in the 
service of another, it is that which is the most dependent ; and that the most 
dependent nations are, not those which have a scarcity of land, but those which 
have a scarcity of capital. 

10 



74 ON PRODUCTION, book i. 

duce of its agriculture, but of the gross produce of its agriculture, 
commerce, and manufacture united. For, in fact, is not the sum 
total, that is to say, the aggregate of the gross product raised by the 
nation, disposable for its consumption ? Is value produced less an 
item of wealth, because it must needs be consumed ? And does not 
value itself originate in this very applicability to consumption. 

The English writer, Stewart, who may be looked upon as the leading 
advocate of the exclusive system, the system founded on the maxim, 
that the wealth of one set of men is derived from the impoverish- 
ment of another, is himself no less mistaken in asserting, that, '"'when 
once a stop is put to external commerce, the stock of internal wealth 
cannot be augmented."* Wealth, it seems, can come only from 
abroad; but abroad, where does it come from? from abroad also. So 
that in tracing it from abroad to abroad, we must necessarily, in the 
end, exhaust every source, till at last we are compelled to look for it 
beyond the limits of our own planet, which is absurd. 

Forbonnais,t too, builds his prohibitary system on this glaring 
fallacy; and, to speak freely, on this fallacy are founded the exclu- 
sive systems of all the short-sighted merchants, and all the govern- 
ments of Europe and of the world. They all take it for granted, 
that what one individual gains must needs be lost to another; that 
what is gained by one country is inevitably lost to another: as if 
things were incapable of receiving any increase of value; and as if 
the possessions of abundance of individuals and of communities could 
not be multiplied, without the robbery of some body or other. If 
one man, or set of men, could only be enriched at others' expense, 
how could the whole number of individuals, of whom a state is com- 
posed, be richer at one period than at another, as they now confess- 
edly are in France, England, Holland, and Germany, compared with 
what they were formerly.'' How is it, that nations are in our days 
more opulent, and their wants better supplied in every respect, than 
they were in the seventeenth century? Whence can they have 
derived that portion of their present wealth, which then had no 
existence? Is it from the mines of the new continent? They had 
already advanced in wealth before the discovery of America. Be- 
sides, what is that which these mines have furnished? Metallic 
wealth Or value. But all the other values which those nations now 
possess, beyond what they did in the middle ages, whence are they 
derived? Is it not clear, that these can be no other than created 
values? 

We must conclude, then, that wealth, which consists in the value 
that human industry, in aid and furtherance of natural agents, com- 
municates to things, is susceptible of creation and destruction, of 
increase and diminution, within the limits of each nation, and inde- 
pendently of external agency, according to the method it adopts to 
bring about those effects. An important truth, which ought to teach 

* Essay on Political Economy, b. ii. c. 26. 
■}■ Elemens de Commerce. 



CHAP. III. ON PRODUCTION. 75 

mankind, that the objects of rational desire are within their reach, 
provided they have the will and intelligence to employ the true 
means of obtaining them. Those means it is the purpose of this 
work to investigate and unfold. 



CHAPTER III. 

OF THE NATURE OP CAPITAL, AND THE MODE IN WHICH IT CONCURS 
IN THE BUSINESS OF PRODUCTION. 

As we advance in the investigation of the processes of industry, 
we cannot fail to perceive, that mere unassisted industry is insuffi- 
cient to invest things with value. The human agent of industry 
must, besides, be provided with pre-existing products; without which 
his agency, however skilful and intelligent, would never be put in 
motion. These pre-existing requisites are, 

1. The tools and implements of the several arts. The husband- 
man could do nothing without his spade and mattock, the weaver, 
without his loom, or the mariner without his ship. 

2. The products necessary for the subsistence of the industrious 
agent, as long as he is occupied in completing his share of the work 
or production. This outlay of his subsistence is, indeed, in the long 
run, replaced by the product he is occupied upon, or the price he 
will receive for it; but he is obliged continually to make the advance. 

3. The raw materials, which are to be converted into finished 
products by the means of his industry. These materials, it is true, 
are often the gratuitous offijrings of nature, but they are much more 
generally the products of antecedent industry, as is in the case ot Seed- 
corn supplied by agriculture, metals, the fruit of the labour of the 
miner and smelter, drugs brought by the merchant perhaps from the 
extremities of the globe. The value of all these must be found in 
advance by the industrious agent that works them up. 

The value of all these items constitutes what is denominated joro- 
ductive capital. 

Under this head of productive capital must likewise be classed the 
value of all erections and improvements upon real or landed property, 
which increase its annual produce, as well as that of the farming live 
and dead stock, that operates as machinery in aid of human industry. 

Another item of productive capital, is money, whenever it is 
employed to facilitate the interchange of products, without which 
production could never make any progress. Money distributed 
through the whole mechanism of human industry, like the oil that 
greases the wheels of complex machinery, gives the requisite ease 
and facility to its movements. But gold and silver are not produc- 
tive unless employed by industry : they are like the oil in a machine 



76 ON PRODUCTION. book 

remaining in a state of inaction. And so also of all other tools and ^ 
implements of human industry. ^ ^ 

It would evidently be a great mistake to suppose that the capital 
of a community consists solely of its money. The merchant, the 
manufacturer, the cultivator, commonly have the least considerable 
portion of the value composing their capital invested in the form of 
money; nay, the more active their concern is, the smaller is their 
relative proportion of their capital so vested to the residue. The 
funds of the merchant are placed out in goods on their transit by 
land or water, or warehoused in different directions: the capital of 
the manufacturer chiefly consists of the raw material in different 
stages of progress, of tools, implements, and necessaries for his work- 
men: while that of the cultivator is vested in farming buildings, live 
stock, fences and enclosures. They all studiously avoid burthening 
themselves with more money than is sufficient for current use. 

What is true of one, two, three, or four individuals, is true of 
society in the aggregate. The capital of a nation is made up of the 
sum total of private capitals; and, in proportion as a nation is pros- 
perous and industrious, in the same proportion is that part of its 
capital, vested in the shape of money, trifling compared to the amount 
of the gross national capital. Neckar estimates the circulating 
medium in France, in the year 1784, at about 440 millions of dol- 
lars, and there are reasons for believing his estimate exaggerated; 
but this is not the time to state them. However, if account be taken 
of all the works, enclosures, live stock, utensils, machines, ships, 
commodities, and provisions of all sorts belonging to the French 
people or their government in every part of the world; and, if to 
these be added the furniture, decorations, jewellery, plate, and other 
items of luxury or convenience, whereof they were possessed, at the 
same period, it will be found that 440 millions of circulating medium 
was a mere trifle compared to the aggregate of these united values.* 

Beeke estimates the total capital of Great Britain at 2300 millions 
sterling,! (equal to more than 11,000 millions of dollars.) The total 
amount of her circulating specie, before the establishment of her 
present paper money, was never reckoned by the highest estimates 
of more than 47 millions sterling;^ that is to say, about l-50th of 
her capital. Smith reckoned it at no more than 18 millions, which 
could not be the l-127th part.(l). 

* Arthur Young, in his " Journey in France,''^ in spite of the unfavourable view 
he gives of French Agriculture, estimates the total capital employed in that 
kingdom, in that branch of industry alone, at more than 2200 millions of dollars ;_ 
and states his belief, that the capital of Great Britain, similarly employed, is in 
the proportion of two to one. 

f Observations on the produce of the income-tax. 

% Pitt, who is supposed to have over-rated the quantity of specie, states the 
gold at forty-four millions ; and Price estimates the silver at three millions, 
making a total of forty-seven millions. 

(1) [The following summary recapitulation of the value of property in Great 
Britain and Ireland, in the year 1833, is extracted from " Table XVI. General 



CHAP. III. ON PRODUCTION. 77 

Capital in the hands of a national government forms a part of the 
gross national capital. 

We shall see, by-and-by, how capital, which is subject to a conti- 
nual wear and consumption in the process of production, is continu- 
ally replaced by the very operation of production; or rather, how its 
value, when destroyed under one form, re-appears under another. 
At present it is enough to have a distinct conception, that, without it, 
industry could produce nothing. Capital must work, as it were, in 
concert with industry; and this concurrence is what I call the pro- 
ductive agency of capital. 

Estimate of the Public and Private Property of England and Wales, Scot- 
land and Ireland, (1833)," from "Pebrer on the Taxation, Debt, Capital, 
Resources, &c. of the whole British Empire," a work of the highest authority, 
published in London, April, 1833. 

SUMMARY RECAPITULATION. 
aggregate value of property in great BRITAIN AND IRELAND. 

Productive Private Property, £2,995,000,000 

Unproductive do. -580,700,000 

3,575,700,000 
Public Property, 103,800,000 

Total, £3,679,500,000 

Equal to dollars, 17,661,600,000 

England and Wales : 

Productive Private Property, . . . £3,054,600,000 
Unproductive do. ... 374,300,000 

2,428,900,000 

Scotland : 

Productive Private Property, . . . 318,300,000 

Unproductive do. ... .51,100,000 

369,400,000 

Ireland : 

Productive Private Property, . . . 622,100,000 

Unproductive do. .... 116,400,000 

738,500,000 

Do. do. in Great Britain and Ireland, 38,900,000 

Public Property in England and Wales, 42,000,000 

Do. in Scotland, . . . 3,900,000 

Do. in Ireland, . . . 11,900,000 

Do. in common to Great Britain "^ 

and Ireland, as the Navy, Military, and C 46,000,000 
Ordnance Stores, &c. S 

103,800,000 

Grand Total, £3,679,500,000 

Equal to dollars, , . . . . 17,661,600,000 

American Editor. 



78 ON PRODUCTION. book i. 



CHAPTER IV. 

OF NATURAL AGENTS THAT ASSIST IN THE PRODUCTION OF WEALTH, 
AND SPECIALLY OF LAND. 

Independently of the aid that industry receives from capital, 
that is to say, from products of her own previous creation, towards 
the creation of still further products, she avails herself of the agency 
and powers of a variety of agents not of her own creation, but offered 
spontaneously by nature: and from the co-operation of these natural 
agents derives a portion of the utility she communicates to things. 

Thus, when a field is ploughed and sown, besides the science and 
the labour employed in this operation, besides the pre-created values 
brought into use, the values, for instance, of the plough, the harrow, 
the seed-corn, the food and clothing consumed by labourers during 
the process of production, there is a process performed by the soil, 
the air, the rain, and the sun, wherein mankind bears no part, but 
which nevertheless concurs in the creation of the new product that 
will be acquired at the season of harvest. This process I call the 
productive agency of natural agents. 

The term natural agents is here employed in a very extensive 
sense; comprising not merely inanimate bodies, whose agency ope- 
rates to the creation of value, but likewise the laws of the physical 
world, as gravitation, which makes the weight of a clock descend; 
magnetism, which points the needle of the compass: the elasticity of 
steel; the gravity of the atmosphere; the property of heat to dis- 
charge itself by ignition, &c. &c. 

The productive faculty of capital is often so interwoven with that 
of natural agents, that it is difficult, or perhaps impossible, to assign, 
with accuracy, their respective shares in the business of production. 
A hot house for the raising of exotic plants,, a meadow fertilized by 
judicious irrigation, owe the greater part of their productive powers 
to works and erections, the effect of antecedent production, which 
form a part of the capital devoted to the furtherance of actual and 
present production. The same may be said of land newly cleared 
and brought into cultivation; of farm-buildings; of enclosures; and 
of all other permanent ameliorations of a landed estate. These 
values are items of capital, though it be no longer possible to sever 
them from the soil they are attached to.* 

In the employment of machinery, which wonderfully augments 
the productive power of man, the product obtained is due partly to 
the value of the capital vested in the machine, and partly to the 

* It is for the proprietor of the land and of the capital respectively, when the 
ownership is in different persons, to settle between them the respective value 
and efficacy of the agency of these two productive agents. The world at large 
may be content to comprehend, without taking the trouble of measuring their 
respective shares in the production of wealth. 



CHAP. IV. ON PRODUCTION. 79 

agency of natural powers. Suppose a tread-mill,* worked by ten 
men, to be used in place of a wind-mill, the product of the mill 
might be considered as the fruit of the productive agency of a capi- 
tal consisting of the value of the machine, and of the labour of ten 
men employed in turning the wheel. If the tread-mill be supplant- 
ed by sails, it is evident that the wind, a natural agent, does the work 
of ten human beings. 

In this instance, the absence of the natural agent might be reme- 
died, by the employment of another power; but there are many 
cases, in which the agency of nature could not possibly be dispensed 
with, and is yet equally positive and real; for example, the vegeta- 
tive power of the soil, the vital principle which concurs in the pro- 
duction of the animals domesticated to our use. A flock of sheep 
is the joint result of the owner's and shepherd's care, and the capital 
advanced in fodder, shelter, and shearing, and of the action of the 
organs and viscera with which nature has furnished these animals. 

Thus nature is commonly the fellow-labourer of man and his 
instruments; a fellowship advantageous to him in proportion as he 
succeeds in dispensing with his own personal agency, and that of 
his capital, and in throwing upon nature a larger part of the burthen 
of production. 

Smith has taken infinite pains to explain, how it happens that 
civilized communities enjoy so great an abundance of products, in 
comparison with nations less polished, and in spite of the swarm of 
idlers and unproductive labourers that is to be met with in society. 
He has traced the source of that abundance to the division of la- 
bour;! and it cannot be doubted, that the productive power of in- 
dustry is wonderfully enhanced by that division, as we shall here- 
after see by following his steps; but this circumstance alone is not 
sufficient to explain a phenomenon, that will no longer surprise, if 
we consider the power of the natural agents that industry and civili- 
zation set at work for our advantage. 

Smith admits that human intelligence, and the knowledge of the 
laws of nature, enable mankind to turn the resources she offers to 
better account: but he goes on to attribute to the division of labour 
this very degree of intelligence and knowledge: and he is right to 
a certain degree; for a man, by the exclusive pursuit of a single art 
or science, has ampler means of accelerating its progress towards 
perfection. But, when once the system of nature is discovered, the 
production resulting from the discovery, is no longer the product of 
the inventor's industry. The man who first discovered the property 
of fire to soften metals, was not the actual creator of the utility this 
process adds to smelted ore. That utility results from the physical 

* A wheel in the form of a drum, turned by men walking inside, (roue a 
marchre.) 

I Take his own words: " It is the great multiplication of the productions of 
all the different arts, in consequence of the division of labour, which occasions, 
in a well-governed society, that universal opulence, which extends itself to the 
lowest ranks of the people." Wealth of Nations, b. i. c. 1. 



80 ON PRODUCTION. book i. 

action of fire, in concurrence, it is true, with the lahour and capital 
of those who employ the process. But are there no processes that 
mankind owes the knowledge of to pure accident? or that are so self- 
evident, as to have required no skill to discover? When a tree, a 
natural product, is felled, is society put into possession of no greater 
produce than that of the mere labour of the woodman? 

From this error Smith has drawn the false conclusion, that all 
values produced represent pre-exerted human labour or industry, 
either recent or remote; or, in other words, that wealth is nothing 
more than labour accumulated; from which position he infers a se- 
cond consequence equally erroneous, viz. that labour is the sole 
measure of wealth, or of value produced. 

This system is obviously in direct opposition to that of the 
economists of the eighteenth century, who, on the contrary, main- 
tained that labour produces no value without consuming an equiva- 
lent; that, consequently, it leaves no surplus, no net produce; and that 
nothing but the earth produces gratuitous value, — therefore nothing 
else can yield net produce. Each of these positions has been re- 
duced to system; I only cite them to warn the student of the dan- 
gerous consequences of an error in the outset,* and to bring the 
science back to the simple observation of facts. Now facts demon- 
strate, that values produced are referable to the agency and concur- 
rence qf industry, of capital, t and of natural agents, whereof the 
chief, though by no means the only one, is land capable of cultiva- 
tion; and that no other but these three sources can produce value, or 
add to human wealth. 



* Amongst other dangerous consequences of the system of the economists, is 
the notable one of substituting a land-tax in lieu of all other taxation; in the 
certainty, that this tax would affect all produced value whatever. Upon a con- 
trary principle, and in pursuance of the maxims laid down by Smith, the net 
produce of land and of capital ought to be exempted from taxation altogether, if 
with him we take for granted, that they produce nothing spontaneously; but this 
would be as unjust on the opposite side. 

f Although Smith has admitted the productive power of land, he has disre- 
garded the completely analogous power of capital. A machine, an oil-mill for 
example, which employs a capital of 4000 dollars, and gives an annual net return 
of 200 dollars, after paying all expenses, gives a product quite as substantial as that 
of a real estate, that cost 4000 dollars, and brings an annual rent or net produce of 
200 dollars, all charges deducted. Smith maintains, that a mill which has cost 
4000 dollars, represents labour to that amount, bestowed at sundry times upon the 
different parts of its fabric; therefore, that the net produce of the mill is the net pro- 
duce of that precedent labour. But he is mistaken : granting for argument sake, the 
value of the mill itself to be the value of this previous labour; yet the value daily 
produced by the mill is a new value altogether; just the same as the rent of a 
landed estate is a totally different value from the value of the estate itself, and 
may be consumed, without at all affecting the value of the estate. If capital 
contained itself no productive faculty, independent of that of the labour which 
created it, how is it possible, that capital could furnish a revenue in perpetuity, 
independent of the profit of the industry that employed it? The labour that 
created the capital would receive wages after it ceased to operate — would have 
interminable value; which is absurd. It will be seen by-and-by, that these 
notions have not been mere matter of speculation. 



CHAP. IV. ON PRODUCTION. SI 

Of natural agents, some are susceptible of appropriation, that is 
to say, of becoming the property of an occupant, as a field, a cur- 
rent of water; others can not be appropriated, but remain liable- to 
public use, as the wind, the sea, free navigable streams, the physical 
or chemical action of bodies one upon another, &c. &c. 

We shall by and by have an opportunity of convincing ourselves, 
that this alternative, of productive agents being or not being suscept- 
ible of appropriation, is highly favourable to the progress of wealth. 
Natural agents, like land, which are susceptible of appropriation, 
would not produce nearly so much, were not the proprietors certain 
of exclusively gathering their produce, and able to vest in them, 
with full confidence, the capital which so much enlarges their pro- 
ductiveness. On the other hand, the indefinite latitude allowed to 
industry to occupy at will the unappropriated natural agents, opens 
a boundless prospect to the extension of her agency and production. 
It is not nature, but ignorance and bad government, that limit the 
productive powers of industry. 

Such of the natural agents as are susceptible of appropriation, 
form an item of productive means; for they do not yield their con- 
currence without equivalent; which equivalent, as we shall see in 
the proper place, forms an item of the revenues of the appropriators. 
At present we must be content to investigate the productive opera- 
tion of natural agents of every description, whether already known, 
or hereafter to be discovered. 



CHAPTER V. 

ON THE MODE IN WHICH INDUSTRY, CAPITAL, AND NATURAL AGENTS 
UNITE IN PRODUCTION. 

We have seen how industry, capital, and natural agents concur in 
production, each in its respective department; and we have likewise 
seen, that these three sources are indispensable to the creation of 
products. It is not, however, absolutely necessary that they should 
all belong to the same individual. 

An industrious person may lend his industry to another possessed 
of capital and land only. 

The owner of capital may lend it to an individual possessing land 
and industry only. 

The landholder may lend his estate to a person possessing capital 
and industry only. 

Whether the thing lent be industry, capital, or land, inasmuch as 
all three concur in the creation of value, their use also bears value, 
and is commonly paid for. 

The price paid for the loan of industry is called wages. 

The price paid for the loan of capital is called interest. 
11 



82 ON PRODUCTION. book i. 

And that paid for the loan of land is called rent. 

The ownership of land, capital, and industry are sometimes united 
in the same hands. A man who cultivates his own garden at his 
own expense, is at once the possessor of land, capital, and industry, 
and exclusively enjoys the profits of proprietor, capitalist, and 
labourer. 

The knife-grinder's craft requires no occupancy of land; he car- 
ries his stock in trade upon his shoulders, and his skill and industry 
at his fingers' ends; being at the same time adventurer,(«) capitalist, 
and labourer. 

It is seldom that we meet with adventurers in industry so poor, 
as not to own at least a share of the capital embarked in their con- 
cern. Even the common labourer generally advances some portion; 
the bricklayer comes with his trowel in his hand; the journeyman 
tailor is provided with his thimble and needles; all are clothed better 
or worse; and though it be true, that their clothing must be found 
out of their wages, still they find it themselves in advance. 

Where the land is not exclusive property, as is the case with 
some stone-quarries, with public rivers and seas to which industry 
resorts for fish, pearls, coral, &c., products may be obtained by 
industry and capital only. 

Industry and capital are likewise competent to produce by them- 
selves, when that industry is employed upon products of foreign 
growth, procurable by capital only; as in the European manufac- 
ture of cotton and many other articles. So that every class of 
manufacture is competent to raise products, provided there be in- 
dustry and capital exerted. The presence of land is not absolutely 
necessary, unless perhaps the area whereon the work is done, and 
which is commonly rented, may be thought to come under this 
description, as in extreme strictness it certainly must. However, 
if the ground where the business of industry is carried on, be 
reckoned as land used, it must at least be admitted, that, with aid of 
a large capital, an immense manufacturing concern may be conducted 
upon a very trifling spot of ground. Whence this conclusion may be 
drawn, that national industry is limited, not by territorial extent, 
but by extent of capital. 

A stocking manufacturer with a capital, say of 4000 dollars, may 
keep in constant work ten stocking frames. If he manages to double 
his capital he can employ twenty; that is to say, he may buy ten more 
frames, pay double ground-rent, purchase double the quantity of 
silk or cotton to be wrought into stockings, and make the requisite 
advances to double the number of workmen, &c. &c. 

But that portion of agricultural industry, devoted to the tillage of 

(a) The term entrepreneur is difficult to render in English ; the corresponding 
word, undertaker, being already appropriated to a limited sense. It signifies 
the master-manufacturer in manufacture, the farmer in agriculture, and the mer- 
chant in commerce; and generally in all three branches, the person who takes 
upon himself the immediate responsibility, risk, and conduct of a concern of 
industry, whether upon his own or a borrowed capital. For want of a better 
word, it will be rendered into English by the terra adventurer. T. 



II 



CHAP. VI. ON PRODUCTION. 83 

land, is, in the course of nature, limited by extent of surface. Neither 
individuals nor communities can extend or fertilize their territory, 
beyond what the nature of things permits; but they have unlimited 
power of enlarging their capital, and, consequently, of setting at 
work a larger body of industry, and thus of multiplying their pro- 
ducts; in other words, their wealth. 

There have been instances of people, like the Genevese, who with 
a territory that has not produced the twentieth part of the necessa- 
ries of life, have yet contrived to live in affluence. The natives of 
the barren glens of Jura are in easy circumstances, because many 
mechanical arts are there practised. In the 13th century, the world 
beheld the republic of Venice, ere it held a foot of land in Italy, 
derive wealth enough from its commerce to possess itself of Dalma- 
tia, together with most of the Greek isles, and even the capital of 
the Greek empire. The extent and fertility of a nation's territory 
depend a good deal upon its fortunate position. Whereas the power 
of its industry and capital depends upon its own good management; 
for it is always competent to improve the one and augment the 
other. 

Nations deficient in capital, labour under great disadvantage in the 
sale of their produce; being unable to sell at long credit, or to 
grant time or accommodation to their home or foreign customers. If 
the deficiency be very great indeed, they may be unable even to 
make the advance of the raw material and their own industry. This 
accounts for the necessity, in the Indian and Russian trade, of re- 
mitting the purchase-money six months or sometimes a year in 
advance, before the time when an order for goods can be executed. 
These nations must be highly favoured in other respects, or they 
never could make considerable sales in the face of such a disad- 
vantage. 

Having informed ourselves of the method in which the three 
great agents of production, industry, capital and natural agents, con- 
cur in the creation of products, that is to say, of things applicable to 
the uses of mankind, let us proceed to analyze more minutely the 
particular operation of each. The inquiry is important, inasmuch 
as it leads imperceptibly to the knowledge of what is more and what 
is less favourable to production, the true source of individual affluence, 
as well as of national power. 



CHAPTER VI. 

OF OPERATIONS ALIKE COMMON TO ALL BRANCHES OF INDUSTRY. 

If we examine closely the workings of human industry, it will be 
found, that, to whatever object it be applied, it consists of three dis- 
tinct operations. 



84 ON PRODUCTION. book i. 

The first step towards the attainment of any specific product, is 
the study of the laws and course of nature regarding that product. 
A lock could never have been constructed without a previous. know- 
ledge of the properties of iron, the method of extracting from the 
mine and refining the ore, as well as of mollifying and fashioning the 
metal. 

The next step is the application of this knowledge to an useful pur- 
pose: for instance, the conclusion, or conviction, that a particular 
form, communicated to the metal, will furnish the means of closing a 
door to all the wards, except to the possessor of the key. 

The last step is the execution of the manual labour, suggested 
and pointed out by the two former operations; as, for instance, the 
forging, filing, and putting together of the different component parts 
of the lock. 

These three operations are seldom performed by one and the same 
person. It commonly happens, that one man studies the laws and 
conduct of nature; that is to say, the philosopher, or man of science, 
of whose knowledge another avails himself to create useful products, 
heing either agriculturist, manufacturer, or trader; while the third 
supplies the executive exertion, under the direction of the former 
two; which third person is the operative workman or labourer. 

All products whatever will be found on analysis, to derive exist- 
ence from these three operations. 

Take the example of a sack of wheat, or a pipe of wine. The first 
stage towards the attainment of either of these products was, the 
discovery by the natural philosopher, or geologist,(a) of the con- 
duct and course of nature in the production of the grain or the grape; 
the proper season and soil for sowing or planting; and the care requi- 
site to bring the herb or plant to maturity. The tenant, if not the 
proprietor himself, must afterwards have applied this knowledge to 
his own particular object, brought together the means requisite to 
the creation of an useful product, and removed the obstacles in the 
way of its creation. Finally, the labourer must have turned up the 
soil, sown the seed, or pruned and bound up the vine. These three 
distinct operations were indispensable to the complete production of 
the product, corn or wine. 

Or take the example of a product of external commerce; such as 
indigo. The science of the geographer, the traveller, and the astro- 
nomer, bring us acquainted with the spot where it is to be met with, 
and the means of crossing the seas to get at it. The merchant equips 
his vessels, and sends them in quest of the commodity; and the 
mariner and land-carrier perform the mechanical part of this pro- 
duction. 

But, looking at the substance, indigo, as a mere primary material 
of a further or secondary product, of blue cloth for instance; we all 

(a) Jgronome: I am not aware of any corresponding English term, denoting 
the student in that branch of geology conversant with the properties of the sur- 
face of the earth ; in other words, the scientific agriculturist. T. 



CHAP. VI. ON PRODUCTION. 85 

know that the chemist is first applied to for information, as to the 
nature of the substance, the method of dissolving it, and mordants 
requisite for fixing the colour; the means of perfecting the process 
of dying are then collected by the master manufacturer, under 
whose orders the labourer executes the manual part of the process. 

Industry is, in all cases, divisible into theory, application, and 
execution. Nor can it approximate to perfection in any nation, till 
that nation excel in all three branches. A people, that is deficient 
in one or other of them, cannot acquire products, which are and 
must be the result of all three. And thus we may learn to appreci- 
ate the vast utility of many sciences, which, at first sight, appear to 
be objects of mere curiosity and speculation.* 

The negroes of the coast of Africa are possessed of considerable 
ingenuity, and excel in all athletic exercises and handicraft occupa- 
tions; but they seem greatly deficient in the two previous operations 
of industry. Wherefore, they arc under the necessity of purchasing 
from Europe the stuffs, arms, and ornaments, they stand in need of, 
Their country yields so few products, notwithstanding its natural 
fertility, that the slave traders are obliged to lay in their stock of 
provisions beforehand, to feed the slaves during the voyage. t 

In qualities favourable to industry, the moderns have greatly sur- 
passed the ancients, and the Europeans outstrip all the other nations 
of the globe. The meanest inhabitant of an European town enjoys 
innumerable comforts unattainable to the sovereign of a savage tribe. 
The single article, glass, that admits light into his apartment, and, at 
the same time, excludes the inclemency of the weather, is the beauti- 
ful result of observation and science, accumulated and perfected 
during a long course of ages. To obtain this luxury, it was neces- 
sary previously to know what kind of sand was convertible into a 
substance possessing extension, solidit}', and transparency; as well as 
by the compound of what ingredients, and by what degree of heat, 
the substance was obtainable: to ascertain, besides, the best form of 
furnace. The very wood-work, that supports the roof of a glass- 
house, requires, in its construction, the most extensive knowledge of 
the strength of timber, and of the means of employing it to advantage. 

Nor was the mere knowledge of these matters sufficient; for that 
knowledge might possibly have lain dormant in the memory of one 
or two persons, or in the pages of literature. It was further requi- 

* Besides the direct impulse, given by science to progressive industry, and 
which indeed is indispensable to its success, it affords an indirect assistance, by 
the gradual removal of prejudice: and by teaching mankind to rely more upon 
their own exertions, than on the aid of superhuman power. Ignorance is the 
inseparable concomitant of practical habits, of that slavery of custom which stands 
in the way of all improvement ; it is ignorance that imputes to a supernatural 
cause the ravages of an epidemical disease, which might perhaps be easily pre- 
vented or eradicated, and makes mankind recur to superstitious observances, 
when precaution, or the application of tlie remedy, is all that is wanted. Sci- 
ences, like facts, are linked together by a chain of general connexion, and yield 
one another mutual support and corroboration. 

t See CEuvres de Poivre, p. 77, 78. 



86 ON PRODUCTION. book i. 

site, that a manufacturer should have been found, possessed of the 
means of reducing the knowledge into practice; who should have at 
first made himself master of all that was known of that particular 
branch of industry, and afterwards have accumulated, or procured, 
the requisite capital, collected artificers and labourers, and assigned 
to each his respective occupation. 

Finally, the work must have been completed by the manual skill 
of the workmen employed; some in constructing the buildings and 
furnaces, some in keeping up the fire, mixing up the ingredients, 
blowing, cutting, rolling out, fitting and fixing the pane of glass. 
The utility and beauty of the resulting product, is inconceivable to 
those who have never beheld this admirable creation of human in- 
dustry. By means of industry, the vilest materials have been in- 
vested with the highest degree of utility. The very rags and refuse 
of wearing apparel have been transformed into the white and thin 
sheets, that convey from one end of the globe to the other, the re- 
quisitions of commerce and the particulars of art; that serve as the 
depositories of the conceptions of genius, and the vehicles of human 
experience from one age to another; to them we look for the evi- 
dence of our properties; to them we entrust the most noble and 
amiable sentiments of the heart, and by them we awaken correspond- 
ing feelings in the breasts of our fellow-creatures. The extraordinary 
facilities for the communication of human intelligence which paper 
affords, entitles it to be considered as one of the products that have 
been most efficacious in ameliorating the condition of mankind. 
Fortunate, indeed, would it have been, had an engine so powerful 
never have been made the vehicle of falsehood, or the instrument of 
tyranny ! 

It is worth while to remark, that the knowledge of the man of 
science, indispensable as it is to the development of industry, circu- 
lates with ease and rapidity from one nation to all the rest. And 
men of science have themselves an interest in its diffusion; Jfor 
upon that diffusion they rest their hopes of fortune, and, what is 
more prized by them, of reputation too. For this reason, a nation, in 
which science is but little cultivated, may neverthelevss carry its in- 
dustry to a very great length, by taking advantage of the information 
derivable from abroad. But there is no way of dispensing with .the 
other two operations of industry, the art of applying the knowledge 
of man to the supply of his wants, and the skill of execution. These 
qualities are of advantage to none but their possessors; so that a 
country well stocked with intelligent merchants, manufacturers, 
and agriculturists, has more powerful means of attaining prosperity, 
than one devoted chiefly to the pursuit of the arts and sciences. At 
the period of the revival of literature in Italy, Bologna was the seat 
of science; but wealth was centered in Florence, Genoa, and Venice. 
In our days, the enormous wealth of Britain is less owing to her 
own advances in scientific acquirements, high as she ranks in that 
department, than to the wonderful practical skill of her adventurers 
in the useful application of knowledge, and the superiority of her 



CHAP. VI. ON PRODUCTION. 87 

workmen in rapid and masterly execution. The national pride, that 
the English are often charged with, does not prevent their accom- 
modating themselves with wonderful facility to the tastes of their 
customers and the consumers of their produce. They supply with 
hats both the north and the south, because they have learnt to make 
them light for the one market, and warm and thick for the other. 
Whereas the nation that makes but of one pattern, must be content 
with the home market only. 

The English labourer seconds the master manufacturer; he is 
commonly patient and laborious, and does not willingly send out an 
article from his hands, without giving it the utmost possible preci- 
sion and perfection; not that he bestows more time upon it, but that 
he gives it more of his care, attention and diligence, than the work- 
men of most other nations. 

There is no people, however, that need despair of acquiring the 
qualities requisite to the perfection of their industry. It is but 150 
years since England herself had made so little progress, that she pur- 
chased nearly all her woollens from Belgium; and it is not more than 
80 years since Germany supplied with cotton goods the very nation, 
that now manufactures them for the whole world.* 

1 have said that the cultivator, the manufacturer, the trader, make 
it their business to turn to profit the knowledge already acquired, 
and apply it to the satisfaction of human wants. I ought further to 
add, that they have need of knowledge of another kind, which can 
only be gained in the practical pursuit of their respective occupa- 
tions, and may be called their technical skill. The most scientific 
naturalist, with all his superior information, would probably succeed 
much worse than his tenant, in the attempt to improve his own land. 
A first rate mechanist would most likely spin very indifferently 
without having served his apprenticeship, though admirably skilled 
in the construction of the cotton-machinery. In the arts there is a 
certain sort of perfection, that results only from repeated trials, 
sometimes successful and sometimes the contrary. So that science 
alone is not sufficient to ensure the progress, without the aid of ex- 
periment, which is always attended with more or less of risk, and 
does not always indemnify the adventurer, whose profit, even when 
successful, is moderated by competition; although society at large 
receives the accession of a new product, or, what amounts to the 
same thing, of an abatement in the price of an old one. 

In agriculture, experiments usually cost the rent of the soil for a 
year or more, over and above the labour and the capital engaged in 
them. 

♦The cotton manufacture did not exist in England in the 17th century. In 
1705, we see by the returns of the English customs, that the raw cotton manu- 
factured in that country then amounted to no more than 1,170,880 pounds weight. 
In 1785, the quantity imported was 6,706,000 lbs.; but in 1790 it had got up to 
25,941,000 lbs., and in 1817 to as much as 131,951,000 lbs., for the English 
market and for re-exportation. The quantity of cotton imported in 1831, into 
the United Kingdoms, was 288,708,453 lbs. 



88 ON PRODUCTION. book i. 

In manufacture, experiment is hazarded on safer grounds of cal- 
culation, capital engaged for a much shorter period, and, if success 
ensue, the adventurer rewarded by a longer period of exclusive ad- 
vantage, because his process is less open to observation. In some 
places, too, the exclusive advantage is protected by patents of inven- 
tion. For all which reasons, the progress of manufacturing is gene- 
rally more rapid and more diversified than that of agricultural industry. 

In commercial industry, the risk of experiment would be greater 
than in the other two branches, if the costs of the adventure had no 
auxiliary and concurrent object. But it is usually in the course of a 
regular trade, that a merchant hazards the introduction of a virgin 
commodity of foreign growth into an untried market. In this man- 
ner it was that the Dutch, about the middle of the seventeenth cen- 
tury, while prosecuting their commerce with China, with no very 
sanguine expectation, made experiment of a small assortment of dried 
leaves, from which the Chinese were in the habit of preparing their 
favourite beverage. Thus commenced the tea-trade, which now 
occasions the annual transport of more than 45 millions of pounds 
weight, that are sold in Europe for a sum of more than 80,000,000 
of dollars.* 

In some cases of very rare occurrence, boldness is nearly certain 
of success. When the Europeans had recently discovered the pass- 
age round the Cape of Good Hope and the continent of America, 
their world was suddenly expanded to the East and West; and such 
was the infinity of new objects of desire in two hemispheres, whereof 
one was not at all, and the other but very imperfectly, known before, 
that an adventurer had only to make the voyage, and was sure of 
selling his returns to great advantage. 

In all but such extraordinary castes, it is perhaps prudent to defray 
the charges of experiments in industry, not out of the capital en- 
gaged in the regular and approved channels of production, but out 
of the revenue that individuals have to dispose of at pleasure, with- 
out fear of impairing their fortune. The whims and caprices that 
divert to an useful end the leisure and revenue which most men 
devote to mere amusement, or perhaps to something worse, cannot 
be too highly encouraged. I can conceive no more noble employ- 
ment of wealth and talent. A rich and philanthropic individual 
may, in this way, be the means of conferring upon the industrious 
classes, and upon the consumers at large, in other words, upon the 
mass of mankind, a benefit far beyond the mere value of what he 
actually disburses, perhaps beyond the whole amount of his fortune, 
however princely it may be. Who will attempt to calculate the 
value conferred on mankind by the unknown inventor of the ploughPt 
A government, that knows and practices its duties, and has large 
resources at its disposal, does not abandon to individuals the whole 

* Voyage Commcrciel et Politique aux Indes Orientaks, par M. Felix Renmard 
de Sainte Croix. 

f Thanks to the art of printing, the names of the benefactors of mankind will 
henceforward be lastingly recorded; and if 1 mistake not, with more veneration 



CHAP. VII. ON PRODUCTION. 89 

glory and merit of invention and discovery in the field of industry. 
The charges of experiment, when defrayed by the government, are 
not subtracted from the national capital, but from the national revenue; 
for taxation never does, or, at least, never ought to touch any thing 
beyond the revenues of individuals. The portion of them so spent 
is scarcely felt at all, because the burthen is divided among innumer- 
able contributors; and, the advantages resulting from success being a 
common benefit to all, it is by no means inequitable that the sacri- 
fices, by which they are obtained, should fall on the community at 
large. 



CHAPTER VII. 

OF THE LABOUR OF MANKIND, OF NATURE, AND OF MACHINERY 

RESPECTIVELY. 

By the term labour I shall designate that continuous action, exert- 
ed to perform any one of the operations of industry, or a part only 
of one of those operations. 

Labour, upon whichever of those operations it be bestowed, is 
productive, because it concurs in the creation of a product. Thus 
the labour of the philosopher, whether experimental or literary, is 
productive; the labour of the adventurer or master-manufacturer is 
productive, although he perform no actual manual work; the labour 
of every operative workman is productive, from the common day- 
labourer in agriculture, to the pilot that governs the motion of a ship. 

Labour of an unproductive kind, that is to say, such as does not 
contribute to the raising of the products of some branch of industry 
or other, is seldom undertaken voluntarily; for labour, under the 
definition above given, implies trouble, and trouble so bestowed 
could yield no compensation or resulting benefit; wherefore, it 
would be mere folly or waste in the person bestowing it. When 
trouble is directed to the stripping another person of the goods in 
his possession by means of fraud or violence, what was before mere 
extravagance and folly, degenerates to absolute criminality; and 
there results no production, but only a forcible transfer of wealth 
from one individual to another. 

Man, as we have already seen, obliges natural agents, and even 

than those which derive lustre from the deplorable exploits of military prowess. 
Among these will be preserved the names of Olivier de Serres, the father of French 
agriculture ; the first who established an experimental farm ; of Duhamel, of 
Malsherbes, to whom France is indebted for many vegetables now naturalized in 
her soil and climate : of Lavoisier, whose new system of chemistry has effected 
a still more important revolution in the arts ; and of the numerous scientific tra- 
vellers of modern times; for travels, with an useful object, may be regarded as 
adventures in the field of industry. 
12 i 



90 ON PRODUCTION. book i. 

the products of his own previous industry, to work in concert with 
him in the business of production. There will, therefore, be no 
difficulty in comprehending the terms labour ov productive service 
of nature, and labour ov productive service of capital. 

The labour performed by natural agents, and that executed by 
pre-existent products, to which we have given the name of capital, 
are closely analogous, and are perpetually confounded one with the 
other: for the tools and machines which form a principal item of 
capital, are commonly but expedients more or less ingenious, for 
turning natural powers to account. The steam engine is but a com- 
plicated method of taking advantage of the alternation of the elasti- 
city of water reduced to vapour, and of the weight of the atmosphere. 
So that, in point of fact, a steam-engine employs more productive 
agency, than the agency of the capital embarked in it: for that ma- 
chine is an expedient for forcing into the service of man a variety 
of natural agents, whose gratuitous aid may perhaps infinitely exceed 
in value the interest of the capital invested in the machine. 

It is in this light that all machinery must be regarded, from the 
simplest to the most complicated instrument, from a common file to 
the most expensive and complex apparatus. Tools are but simple 
machines, and machines but complicated tools, whereby we enlarge 
the limited powers of our hands and fingers; and both are, in many 
respects, mere means of obtaining the co-operation of natural agents.* 
Their obvious effect is to make less labour requisite for the raising 
the same quantity of produce, or, what comes exactly to the same 
thing, to obtain a larger produce from the same quantity of human 
labour. — And this is the grand object and the acme of industry. 

Whenever a new machine, or a new and more expeditious process 
is substituted in the place of human labour previously in activity, 
part of the industrious human agents, whose service is thus ingeni- 
ously dispensed with, must needs be thrown out of employ. Whence 
many objections have been raised against the use of machinery, 
which has been often obstructed by popular violence, and sometimes 
by the act of authority itself. 

To give any chance of wise conduct in such cases, it is necessary 
beforehand to acquire a clear notion of the economical efiect result- 
ing from the introduction of machinery. 

A new machine supplants a portion of human labour, but does not 
diminish the amount of the product; if it did, it would be absurd to 
adopt it. When water-carriers are relieved in the supply of a city 
by any kind of hydraulic engine, the inhabitants are equally well 
supplied with water. The revenue of the district is at least as 
great, but it takes a different direction. That of the water-carriers 
is reduced, while that of the mechanists and capitalists, who furnish 

* Generalization may at pleasure be carried still further ; a landed estate may 
be considered as avast machine for the production of grain, which is refitted and 
kept in repair by cultivation : or a flock of sheep as a machine for the raising of 
mutton or wool. 



CHAP. VII. ON PRODUCTION. 91 

the funds, is increased. But, if the superior abundance of the pro- 
duct and the inferior charges of its production, lower its exchange- 
able value, the revenue of the consumers is benefitted; for to them 
every saving of expenditure is so much gain. 

This new direction of revenue, however advantageous to the com- 
munity at large, as we shall presently see, is always attended with 
some painful circumstances. For the distress of a capitalist, when 
his funds are unprofitably engaged or in a state of inactivity, is 
nothing to that of an industrious population deprived of the means 
of subsistence. 

Inasmuch as machinery produces that evil, it is clearly objection- 
able. But there are circumstances that commonly accompany its 
introduction, and wonderfully reduce the mischiefs, while at the 
same time they give full play to the benefits of the innovation. For, 

1. New machines are slowly constructed, and still more slowly 
brought into use; so as to give time for those who are interested, to 
take their measures, and for the public administration to provide a 
remedy.* 

2. Machines cannot be constructed without considerable labour, 
which gives occupation to the hands they throw out of employ. For 
instance, the supply of a city with water by conduits gives increased 
occupation to carpenters, masons, smiths, paviours, &c. in the con- 
struction of the works, the laying down the main and branch 
pipes, &c. &c. 

3. The condition of consumers at large, and consequently, 
amongst them of the class of labourers eflected by the innovation, 
is improved by the reduced value of the product that class was 
occupied upon. 

Besides, it would be vain to attempt to avoid the transient evil, 
consequential upon the invention of a new machine, by prohibiting 
its employment. If beneficial, it is or will be introduced some- 
where or other; its products will be cheaper than those of labour 
conducted on the old principle; and sooner or later that cheapness 
will run away with the consumption and demand. Had the cotton 
spinners on the old principle, who destroyed the spinning-jennies on 
their introduction into Normandy, in 1789, succeeded in their ob- 
ject, France must have abandoned the cotton manufacture; every 
body would have bought the foreign article, or used some substitute; 
and the spinners of Normandy, who in the end, most of them found 
employment in the new establishments, would have been yet worse 
off for employment. 

* Without having recourse to local or temporary restrictions on the use of new 
methods or machinery, which are invasions of the property of the inventors or 
fabricators, a benevolent administration can make provision for the employment 
of supplanted or inactive labour in the construction of works of public utility at 
the public expense, as of canals, roads, churches, or the like; in extended colo- 
nization ; in the transfer of population from one spot to another. Employment 
is the more readily found for the hands thrown out of work by machinery, 
because they are commonly already inured to labour. 



92 ON PRODUCTION. book i. 

So much for the immediate effect of the introduction of machinery. 
The ultimate effect is wholly in its favour. 

Indeied if by its means man makes a conquest of nature, and com- 
pels the powers of nature and the properties of natural agents to 
work for his use and advantage, the gain is too obvious to need illus- 
tration. There must always be an increase of product, or a diminu- 
tion in the cost of production. If the sale-price of a product do not 
fall, the acquisition redounds to the profit of the producer; and that 
without any loss to the consumer. If it do fall, the consumer is bene- 
fitted to the whole amount of the fall without any loss to the pro- 
ducer. 

The multiplication of a product commonly reduces its price, that 
reduction extends its consumption; and so its production, though 
become more rapid, nevertheless gives employment to more hands 
than before. It is beyond question, that the manufacture of cot- 
ton now occupies more hands in England, France, and Germany, 
than it did before the introduction of the machinery that has abridg- 
ed and perfected this branch of manufacture in so remarkable a 
degree. 

Another striking example of a similar effect is presented by the 
machine used to multiply with rapidity the copies of a literary per- 
formance, — I mean the printing-press. 

Setting aside all consideration of the prodigious impulse given by 
the art of printing to the progress of human knowledge and civiliza- 
tion, I will speak of it merely as a manufacture, and in an economi- 
cal point of view. When printing was first brought into use, a 
multitude of copyists were of course immediately deprived of occu- 
pation; for it may be fairly reckoned, that one journeyman printer 
does the business of two hundred copyists. We may, therefore 
conclude, that 199 out of 200 were thrown out of work. What 
followed? Why, in a little time, the greater facility of reading print- 
ed than written books, the low price to which books fell, the stimu- 
lus this invention gave to authorship, whether devoted to amusement 
or instruction, the combination, in short, of all these causes, operated 
so effectually as to set at work, in a very little time, more journey- 
men printers than there were formerly copyists. And if we could 
now calculate with precision, besides the number of journeymen 
printers, the total number of other industrious people that the press 
finds occupation for, whether as type-founders and moulders, paper- 
makers, carriers, compositors, bookbinders, or booksellers, and the 
like, we should probably find, that the number of persons occupied 
in the manufacture of books is now 100 times what it was before the 
art of printing was invented. 

It may be allowable to add, that viewing human labour and ma- 
chinery in the aggregate, in the supposition of the extreme case, viz. 
that machinery should be brought to supersede human labour alto- 
gether, yet the numbers of mankind would not be thinned, for the 
sum total of products would be the same, and there would probably 
be less sufiering to the poorer and labouring classes to be apprehend- 



CHAP. VII. ON PRODUCTION. 93 

ed; for in that case the momentary fluctuations, that distress the dif- 
ferent branches of industry, would principally affect machinery, 
which, and not human labour, would be paralyzed; and machinery 
can not die of hunger; it can only cease to yield protit to its employ- 
ers, who are generally farther removed from want than mere 
labourers. 

But however great may be the advantages, which the adventur- 
ers in industry, and even the operative classes, may ultimately 
derive from the employment of improved machinery, the great gain 
accrues to the consumers, which is always the most important class, 
because it is the most numerous; because it comprehends every 
description of producers whatever; and because the welfare of this 
class, wherein all others are comprised, constitutes the general well 
being and prosperity of a nation.* I repeat, that it is the consumers 
who draw the greatest benefit from machinery; for though the 
inventor may indeed for some years enjoy the exclusive advantage of 
his invention, which it is highly just and proper he should, yet there 
is no instance of a secret remaining long undivulged. Nothing can 
long escape publicity, least of all what people have a personal inter- 
est in discovering, especially if the secret be necessarily confided to 
the discretion of a number of persons employed in constructing or in 
working the machine. The product is thenceforward cheapened by 
competition to the full extent of the saving in the cost of production; 
and thenceforward begins the full advantage to the consumer. — 
The grinding of corn is probably not more profitable to the miller 
now than formerly; but it costs infinitely less to the consumer. 

Nor is cheapness the sole benefit that the consumer reaps from 
the introduction of more expeditious processes: he generally gains 
in addition the greater perfection of the product. Painters could un- 
doubtedly execute with the brush or pencil the designs that orna- 
ment our printed calicoes and furniture papers, but the copperplates 
and rollers employed for that purpose give a regularity of pattern, 
and uniformity of colour, which the most skilful artist could never 
equal. 

The close pursuit of this inquiry through all the arts of industry 
would show, that the advantage of machinery is not limited to the 
bare substitution of it for human labour, but that, in fact, it gives a 
positive new product, inasmuch as it gives a degree of perfection 
before unknown. The flatting-mill and the die execute products, 
that the utmost skill and attention of the human hand could never 
accomplish. 

In fine, machinery does still more; it multiplies products with 
which it has no immediate connexion. Without taking the trouble 
to reflect, one perhaps would scarcely imagine that the plough, the 
harrow, and other similar machines, whose origin is lost in the night 

* Paradoxical as it may appear, it is nevertheless true, that the labouring class 
is of all others the most interested in promoting the economy of human labour ; 
for that is the class which benefits the most by the general cheapness, and suf- 
fers most from the general dearness of commodities. 



94 ON PRODUCTION. book i. 

of ages, have powerfully contributed to procure for mankind, besides 
the absolute necessaries of life, a vast number of the' superfluities 
they now enjoy, whereof they would otherwise never have had any 
conception. Yet, if the different dressings the soil requires could 
be no otherwise given, than by the spade, the hoe, and other such 
simple and tardy expedients, if we were unable to make available in 
agricultural production those domestic animals, that, in the eye of 
political economy, are but a kind of machines, it is most likely that 
the whole mass of human labour, now applicable to the arts of indus- 
try, would be occupied in raising the bare necessary subsistence of 
the actual population. Thus, the plough has been instrumental in 
releasing a number of hands for the prosecution of the arts, even of 
the most frivolous kind; and what is of more importance, for the 
cultivation of the intellectual faculties. 

The ancients were unacquainted with water or wind-mills. In 
their time, the wheat their bread was made of, was pounded by the 
labour of the hand: so that perhaps no less than twenty individuals 
were occupied in pounding as much wheat as one mill can grind.* 
Now a single miller, or two at the most, is enough to feed and 
superintend a mill. By the aid, then, of this ingenious piece of 
mechanism, two persons are as productive as twenty were in the days 
of Csesar. Wherefore, in every one of our mills, we make the wind, 
or a current of water, do the work of eighteen persons; which 
eighteen extra persons are just as well provided with subsistence; 
for the mill has in no respect diminished the general produce of the 
community: and whose exertions may be directed to the creation of 
new products, to be given by them in exchange for the produce of 
the mill; thereby augmenting the general wealth of the community. t 



CHAPTER VIII. 

OF THE ADVANTAGES AND DISADVANTAGES RESULTING FROM DIVI- 
SION OP LABOUR, AND OF THE EXTENT TO WHICH IT MAY BE 
CARRIED. 

We have already observed that the several operations, the com- 
bination of which forms but one branch of industry, are not in gene- 
ral undertaken or performed by the same person; for they commonly 

* Homer tells us, in the Odyssey, b. xx., that twelve women were daily em- 
ployed in grinding corn for the family consumption of Ulysses, whose establish- 
ment is not represented as larger than that of a private gentleman of fortune of 
modern days. 

f Since the publication of the third edition of this work, M. de Sismondi has 
published his Nouveaux Principes cfEconomie Politique. This valuable writer 
seems to have been impressed with an exaggerated notion of the transient evils, 



CHAP. VIII. ON PRODUCTION. 95 

require different kinds of talent; and the labour requisite to each is 
enough to take up a man's whole time and attention. Nay, in some 
instances, a single one of these operations is split again into smaller 
subdivisions, each of them sufficient for one person's exclusive 
occupation. 

Thus, the study of nature is shared amongst the chemist, the 
botanist, the astronomer, and many other classes of students in 
philosophy. 

Thus, too, in the application of human knowledge to the satisfac- 
tion of human wants, in manufacturing industry, for instance, we 
find different classes of manufacturers employed exclusively in the 
fabric of woollens, pottery, furniture, cottons, &c. &c. 

Finally, in the executive part of each of the three branches of in- 
dustry, there are often as many different classes of workmen as there 
are different kinds of work. To make the cloth of a coat, there 
must have been set to work the several classes of spinners, weavers, 
dressers, shearers, dyers, and many other classes of labourers, each 
of whom is constantly and exclusively occupied upon one operation. 

The celebrated Adam Smith was the first to point out the im- 
mense increase of production, and the superior perfection of products 
referable to this division of labour.* He has cited among other 

and a faint one of the permanent benefits of machinery, and to be utterly unac- 
quainted with those principles of the science, which place those benefits beyond 
controversy, (a) 

*Beccaria, in a public course of lectures on political economy, delivered at 
Milan in the year 1769, and before the publication of Smith's work, had remarked 
the favourable influence of the division of labour upon the multiplication of pro- 
ducts. These are his words: '■'■Ciascuno prova coW esperienzu, che, appUcando 
la mano e Vingegne sempre alio stesso genere di opere e di prodotli, egli piu facilli, 
piu abondanti e migliori ne trova i resultati, di quello, che se ciascuno isolutamente le 
cose tutte a se necessarie soltanio facesse : onde altri pascono le pecore, altri ne cardano 
le lane, altri le tessonoe ■• chi coltiva biade, chi ne fa il pane; chi teste, chi fabrica agli 
agricoltorie la voranti; crescendo e concatenandosi le arti, e divideiidosi ifi talmaniera, 
per la commune e privata utilita gli nomini in varie classi e co7idizioni." "We all 
know, by personal experience, that, by the continual application of the corpo- 
real and intellectual faculties to one peculiar kind of work or product, we can 
obtain the product with more ease, and in greater abundance and perfection, than 
if each were to depend upon his own exertions for all the objects of his wants. 
For this reason, one man feeds sheep, a second cards the wool, and a third 
weaves it: one man cultivates wheat, another makes bread, another makes clothing 
or lodging for the cultivators and mechanics: this multiplication and concatena" 
tion of the arts, and division of mankind into a variety of classes and conditions, 
operating to promote both public and private welfare." 

However, I have given Smith the credit of originality in his ideas of the di- 
vision of labour; first, because, in all probability, he had published his opinions 
from his chair of professor of philosophy at Glasgow before Beccaria, as it is 



(fl) Our author, in his recent argument with Malthus, upon the subject of the 

; excess of manufacturing power and produce, appears to me to have completely 

I vindicated his own positions against the attacks of Sismondi and Malthus; and 

"^ to have exposed the fallacy of the appalling doctrine, that the powers of human 

\ industry can ever be too great and too productive. — Vide Letters a M. Malthus. 



96 ON PRODUCTION. book i. 

examples, the manufacture of pins. The workmen occupied in this 
manufacture execute each but one part of a pin. One draws the 
wire, another cuts it, a third sharpens the points. The head of a 
pin alone requires two or three distinct operations, each performed 
by a different individual. By means of this division, an ill-appointed 
establishment, with but ten labourers employed, could make 48,000 
pins per day, by Smith's account. Whereas, if each person were 
obliged to finish off the pins one by one, going through every ope- 
ration successively from first to last, each would probably make but 
20 per day, and the ten workmen would produce in the whole but 
200, in lieu of 48,000. 

Smith attributes this prodigious difference to three causes: 

1. The improved dexterity, corporeal and intellectual, acquired 
by frequent repetition of one simple operation. In some fabrics the 
rapidity with which some of the operations are performed exceeds 
what the human hand could, by those who had never seen them, be 
supposed capable of acquiring. 

2. The saving of the time which is commonly lost in passing from 
one species of work to another, and in the change of place, position, 
and tools. The attention, which is always slowly transferred, has 
no occasion to transport itself and settle upon a new object. 

3. The invention of a great number of machines, which facilitate 
and abridge labour in all its departments. For the division of labour 
naturally limits each operation to an extremely simple task, and one 
that is incessantly repeated; which is precisely what machinery may 
most easily be made to perform. 

Besides, men soonest discover the methods of arriving at a parti- 
cular end, when the end is approximate, and their attention exclu- 

well known he did the principles that form the ground-work of his book; but 
chiefly because he has the merit of having deduced from them the most impor- 
tant conclusions.(l) 

(1) [All the fundamental doctrines contained in the Inquiry into the Wealth 
of Nations, were comprehended in Dr. Smith's course of political lectures, de- 
livered at Glasgow as early as the year 1752; "at a period, surely," says Du- 
GALD Stewart, "when there existed no French (and he might have added, nor 
Italian) performance on the subject, that could be of much use to him in guiding 
his researches." A short manuscript, drawn up by Dr. Smith in the year 1755, 
fully establishes his exclusive claim to the most important opinions detailed in 
his treatise on the Wealth of Nations, which did not appear until the beginning 
of the year 1776. "A great part of the opinions enumerated in this paper, (he 
observes,) is treated of at length in some lectures which I have still by me 
(1755), and which were written in the hand of a clerk who left my service six 
years ago. They have all of them been the constant subject of my lectures, 
since I first taught Mr. Craigie's class, the first winter 1 spent in Glasgow, 
down to this day, without any considerable variation. — They had all of them 
been the subject of lectures which I read in Edinburgthe winter before I left it, 
and I can adduce innumerable witnesses, both from that place and from this, 
who will ascertain them sufficiently to be mine." Vide Mr. Stewart's Account 
of the Life and Writings of Adam Smith, LL. D. read before the Royal Society 
of Edinburg, January 21 and March 18, 1793.] 

American Editor. 



CHAP. VIII. ON PRODUCTION. 97 

sively directed to it. Discoveries, even in the walk of philosophy, 
are for the most part referable, in their origin, to the subdivision of 
labour; because it is this subdivision that enables men to devote 
themselves to the exclusive pursuit of one branch of knowledge; 
which exclusive devotion has wonderfully favoured their advance- 
ment.* 

Thus the knowledge or theory necessary to the advancement of 
commercial industry for instance, attains a far greater degree of per- 
fection, when different persons engage in the several studies, one of 
geography, with the view of ascertaining the respective position and 
products of different countries; another of politics, with a view to 
inform himself of their national laws and manners, and the advan- 
tages and disadvantages of commercial intercourse with them; a third 
of geometry and mechanics, by way of determining the preferable 
form of the ships, carriages, and machinery of all kinds, that must 
be employed; a fourth of astronomy and natural philosophy, for the 
purposes of navigation, &c. &c. 

Thus, too, the application of knowledge in the same department 
of commercial industry will obviously arrive at a higher degree of 
perfection, when divided amongst the several branches of internal, 
Mediterranean, East and West Indian, American, wholesale and re- 
tail, &c. &c. 

Moreover, such a division is no obstacle to the combination of 
operations not altogether incompatible, more especially if they aid 
and assist each other. There is no occasion for two different mer- 
chants to conduct, one the trade of import for home consumption, 
and the other the trade of export of home products; because these 
operations, far from clashing, mutually facilitate and assist each 
other, (a) 

The division of labour cheapens products, by raising a greater 
quantity at the same or a less charge of production. Competition soon 
obliges the producer to lower the price to the whole amount of the 
saving effected; so that he derives much less benefit than the consu- 
mer; and every obstacle the latter throws in the way of that division 
is an injury to himself. 

* But though many important discoveries in the arts have originated in divi- 
sion of labour, we must not refer to that source the actual products that have re- 
sulted, and will to eternity result, from those discoveries. The increased product 
must flow from the productive power of natural agents, no matter what may have 
been the occasion of our first becoming acquainted with the means of employing 
those agents. Fide supra, Chap. IV. 



(a) The combination of operations which at first sight appears to be distinct, 
is far more practicable in what our author calls the branch of application, than in 
either the theoretical or the executive branch. A general merchant, by means of 
clerks and brokers, will combine a vast variety of difierent commercial opera- 
tions, and yet prosper. Why'? Because his own peculiar task is that of super- 
intendence of commercial dealings; which superintetidence may be extended 
over a greater surface of dealing without incongruity, being on a closer inspec- 
tion, but a repetition of the same operation. T. 
13 



98 ON PRODUCTION. book i. 

Should a tailor try to make his own shoes as well as his coat, he 
would infallibly ruin himself.* We see every day people acting as 
their own merchants, to avoid paying a regular trader the ordinary 
profit of his business; to use their own expression, with the view of 
pocketing that profit themselves. But this is an erroneous calcula- 
tion; for this division of labour enables the regular dealer to execute 
the business for them much cheaper than they can do it themselves. 
Let them reckon up the trouble it costs them, the loss of time, the 
money thrown away in extra charges, which is always proportion- 
ally more in small than in large operations, and see if all these to- 
gether do not amount to more than the two or three per cent that 
might be saved on every paltry item of consumption; even suppo- 
sing them not to be deprived of what little advantage they might 
expect, by the avarice of the cultivator or manufacturer they would 
have to deal directly with, who will of course impose, if he can, 
upon their inexperience. 

It is no advantage, even to the cultivator or manufacturer himself, 
except under very particular circumstances, to intrude upon the 
province of the merchant, and endeavor to deal directly with the 
consumer without his intervention. He would only divert his at- 
tention from his ordinary occupation, and lose time that might be 
far better employed in his own peculiar line; besides being under 
the necessity of keeping up an establishment of people, horses, car- 
riages, &c. the expenses of which would far exceed the merchant's 
profit, reduced as it always must be by competition. 

The advantages accruing from division of labour can be enjoyed 
in respect of particular kinds of products only; and not in them, un- 
til their consumption has exceeded a certain point of extension. Ten 
workmen can make 48,000 pins in a day; but would hardly do so, un- 
less where there was a daily consumption of pins to that amount; for, 
to arrive at this degree of division of labour, one workman must be 
wholly and exclusively occupied in sharpening the points, while the 
rest are severally engaged, each in a difierent part of the process. If 
there be a daily demand for no more than 24,000, he must needs 
lose half his day's work, or change his occupation, in which case, 
the division of labour will be less extensive and complete. 

For this reason, division of labour cannot be carried to the extreme 
limit, except in products capable of distant transport and the conse- 
quent increase of consumption; or where manufacture is carried on 
amidst a dense population, ofiering an extensive local consumption. 
For the same reason, too, many kinds of work, the products of which 
are destined to instantaneous consumption, are executed by the same 
individual, in places where the population is limited. In a small 
town or village, the same person is often barber, surgeon, doctor, 

* The low price of sugar in China is probably occasioned, in part, by the cir- 
cumstance of the grower leaving to a separate class the extraction of the sugar 
from the cane. This operation is performed by itinerant sugar pressers, who 
go from house to house, offering their services, and provided with an extremely 
simple apparatus. Vtde Macartney's Embassy, vol. iv. p. 198 



CHAP. viir. ON PRODUCTION. 99 

and apothecary; while in a populous city, and there only, these are 
not merely separate and distinct occupations, but some of them are 
again subdivided into several branches; that of the surgeon, for in- 
stance, is split into the several occupations of dentist, oculist, ac- 
coucher, &c.; each of which practitioners, by confining his practice 
to a single branch of this extensive art, acquires a degree of skill, 
which, but for this division, he coujd never attain. 

The same circumstance applies equally to commercial industry. 
Take the village grocer; the consumption of his groceries is so lim- 
ited, as to oblige him to be at the same time haberdasher, stationer, 
innkeeper, and who knows what, perhaps even news-writer and pub- 
lisher; whereas in large cities, not only grocery at large, but even 
the sale of a single article of grocery, is a great commercial concern. 
At Paris, London, and Amsterdam, there are shops, where nothing 
else is sold but the single article tea, oil or vinegar; and it is natural 
to suppose that such shops have a much better assortment of the sin- 
gle article, than those dealing in many different commodities at once. 
Thus, in a rich and populous country, the carrier, the wholesale, the 
intermediate, and the retail dealer conduct each a separate branch of 
commercial industry, and conduct it with greater perfection as well 
as greater economy. Yet they all benefit by this economy; and that 
they do so, if the explanations already given are not convincing, ex- 
perience bears irrefragable testimony; for consumers always buy 
cheapest where commercial industry is the most subdivided. Ceteris 
paribus, a commodity brought from the same distance is sold cheap- 
er at a large town or fair, than in a village or hamlet. 

The limited consumption of hamlets and villages, besides obliging 
dealers to combine many elsewhere distinct occupations, prevents 
many articles from finding a regular sale at all seasons. Some are 
not presented for sale at all, except on market or fair days; on such 
days the whole week's or perhaps year's consumption is laid in. 
On all other days, the dealer either travels elsewhere with his wares, 
or finds some other kind of occupation. In a very rich and very 
populous district, the consumption is so great, as to make the sale of 
one article only, quite as much as a trader can manage, though he 
devote every day in the week to the business. Fares and markets 
are expedients of an early stage of national prosperity; the trade by 
caravans of a still earlier stage of inter-national commerce; but even 
these expedients are far better than none at all.* 

* The country markets of France not only exhibit extreme inertness in parti- 
cular channels of consumption ; but a very cursory observation is sufficient to 
show, that the sale of products in them is very limited, and the quality of what 
are sold very inferior. Besides the local products of the district, one sees nothing 
there, except a few tools, woollens, linens, and cottons of the most inferior 
quality. In a more advanced stage of prosperity, one would find some few objects 
of gratification of wants peculiar to a more refined state of existence: some arti- 
cles of furniture combining convenience and elegance of form ; woollens of some 
variety of fineness and pattern ; articles of food of a more expensive kind, whe- 



100 ON PRODUCTION. book i. 

From the necessity of the existence of a very extended consump- 
tion, before division of labour can be carried to its extreme point, it 
follows, that such division can never be introduced in the manufac- 
ture of products, which, from their high price, are placed within the 
reach of few purchasers. In jewellery, especially of the better kinds, 
it is practised in a very limited degree; and such division being, as 
we have seen, one cause of the invention and application of ingenious 
processes, it is not surprising ttiat such processes are least often met 
with in the preparation of products of highly finished workmanship. 
In visiting the workshop of a lapidary, one is often dazzled with the 
costliness of the materials, and the skill and patience of the work- 
man; but it is only in the grand manufactories of articles of univer- 
sal consumption, that one is astonished with the display of ingenuity 
employed to give additional expedition and perfection to the pro- 
duct. In looking at an article of jewellery, it is easy to form an idea 
of the tools and processes, by means of which it has been executed; 
whereas few people, on viewing a common stay-lace, would suppose 
it had been made by a horse or a current of water, which is actually 
the case. 

Of the three branches of industry, agriculture is the one that admits 
division of labour in the least degree. It is impossible to collect any 
great number of cultivators on the same spot, to use their joint exer- 
tions in the raising of one and the same product. The soil they 
work upon is extended over the whole surface of the globe, and 
obliges them to work at considerable distance from each other. Be- 
sides, agriculture does not allow of one person being continually 
employed in the same operation. One man cannot be all the year 
ploughing or digging, any more than another can find constant occu- 
pation in gathering in the crop. Moreover, it is very rarely that the 
whole of one's land can be devoted to the same kind of cultivation, 
or that the same kind of cultivation can be continued on the same 
spot for many successive years. The land would be exhausted; and, 
supposing the cultivation of the whole property to be uniform, yet 
even then, the preparing and dressing of the whole ground, and the 
getting in of the whole of the crops, would come on at the same time, 
and the labourers be unoccupied at other periods of the year.* 

ther on account of their preparation or the distance they may have been brought 
from; a few works of instruction or tasteful amusement; a few books besides 
mere almanacs and prayer books. In a still more advanced stage, the consump- 
tion of all these things would be constant and extensive enough to support regu- 
lar and well stocked shops in all these different lines. Of this degree of wealth 
examples are to be found in Europe, particularly in parts of England, Holland, 
and Germany. 

* It is not common to meet with such large concerns in agriculture, as in the 
branches of commerce and manufacture. A farmer or proprietor seldom under- 
takes more than four or five hundred acres; and his concern, in point of capital 
and amount of produce, does not exceed that of a middling tradesman, or manu- 
facturer. This difference is attributable to many concurrent causes ; chiefly to 
the extensive area this branch of industry requires ; to the bulky nature of the 



CHAP. VIII. -ON PRODUCTION. 101 

Moreover, the nature of his occupation and of agricultural pro- 
ducts makes it highly convenient for the cultivator to raise his 
own vegetables, fruit, and cattle, and even to manufacture part of the 
tools and utensils employed in his house-keeping; though in the other 
channels of industry, these items of consumption give exclusive 
occupation to a number of distinct classes. 

Where concerns of industry are carried on in manufactories, in 
which one and the same master-manufacturer conducts the product 
through all its stages, he can never establish any great subdivision 
of the various operations, without great command of capital. For 
such division requires larger advances of wages, of raw materials, 
and of tools and implements. Where eighteen workmen manufacture 
but twenty pins each per day, that is to say, in all 360 pins, weigh- 
ing scarcely an ounce of metal, the daily advance of an ounce of 
fresh metal is enough to keep them in regular work. But if, in con- 
sequence of division of labour, these same eighteen persons can be 
brought, as we know they can, to produce 86,400 pins, the daily 
supply of raw material requisite for their regular employ will be 
240 ounces weight of metal; consequently a much more considerable 
advance will be called for. If we further take into calculation, that 
there is an interval of probably a month or more, from the purchase 
of the metal by the manufacturer to the period of his reimbursement 
by the sale of his pins, we shall find that he must necessarily have at 
all times on hand, in different stages of progressive manufacture, 30 
times 240 ounces of metal; in other words, the portion of his capital 
vested in raw material alone will amount to the value of 450 lbs. of 
metal. In addition to which, it must be observed, that the division 
of labour cannot be effected without the aid of various implements 
and machines, that form themselves an important item of capital. 
Thus, in poor countries, we frequently find a product carried through 
all its stages, from first to last, by one and the same workman, from 
mere want of the capital requisite for a judicious division of the dif- 
ferent operations. 

We must not however suppose, that, to effect this division of 
labour, it is necessary the capital should be placed all in the hands 
of a single adventurer, or the business conducted all within the walls 
of one grand establishment. A pair of boots undergoes a variety of 
processes, whereof all are not executed by the bootmaker alone; the 
grazier, the tanner, the currier, all others, who immediately or re- 
motely furnish any substance, or tool used in the making of boots, 
contribute to the raising of the product; and though there is a very 
considerable subdivision of labour in the making of this article, the 

produce, and consequent difficulty of collecting it at one point from the distant 
parts of the farm, or sending it to very remote markets ; to the nature of the busi- 
ness itself, which is not susceptible of any regular and uniform system, and 
requires in the adventurer a succession of temporary expedients and directions, 
suggested by the difference of culture, of manuring and dressings, and the variety 
of each labourer's occupations, according to the seasons, the change of weather, 
&c. 



102 ON PRODUCTION. book i. 

greater part of the joint and concurrent producers may have very- 
little command of capital. 

Having detailed the advantages of the subdivision of the various 
occupations of industry, and the extent to which it may be carried, 
the view of the subject would be incomplete, were we to omit 
noticing, on the other hand, the inconveniences that inseparably 
attend it. 

A man, whose whole life is devoted to the execution of a single 
operation, will most assuredly acquire the faculty of executing it 
better and quicker than others; but he will, at the same time, be 
rendered less fit for every other occupation, corporeal or intellectual; 
his other faculties will be gradually blunted or extinguished; and the 
man, as an individual, will degenerate in consequence. To have 
never done any thing but make the eighteenth part of a pin, is a 
sorry account for a human being to give of his existence. Nor is it 
to be imagined that this degeneracy from the dignity of human 
nature is confined to the labourer, that plies all his life at the file or 
the hammer; men, whose professional duties call into play the finest 
faculties of the mind, are subject to similar degradation. This divi- 
sion of occupations has given rise to the profession of attornies, 
whose sole business it is to appear in the courts of justice instead of 
the principals, and to follow up the difierent steps of the process on 
their behalf. These legal practitioners are, confessedly, seldom 
deficient in technical skill and ability; yet it is not uncommon to 
meet with men, even of eminence in this profession, wholly igno- 
rant of the most simple processes of the manufactures they every 
day make use of; who, if they were set to work to mend the simplest 
article of their furniture, would scarcely know how to begin, and 
could probably not drive a nail, without exciting the risibility of 
every carpenter's awkward apprentice; and if placed in a situation 
of a greater emergency, called upon, for instance, to save a drowning 
friend, or to rescue a fellow townsman from a hostile attack, would 
be in a truly distressing perplexity; whereas a rough peasant, inha- 
biting a semi-barbarous district, would probably extricate himself 
from a similar situation with honour. 

With regard to the labouring class, the incapacity for any other 
than a single occupation, renders the condition of mere labourers 
more hard and wearisome, as well as less profitable. They have 
less means of enforcing their own rights to an equitable portion of 
the gross value of the product. The workman, that carries about 
with him the whole implements of his trade, can change his locality 
at pleasure, and earn his subsistence wherever he pleases: in the 
other ease, he is a mere adjective, without individual capacity, inde- 
pendence, or substantive importance, when separated from his fellow 
labourers, and obliged to accept whatever terms his employer thinks 
fit to impose. 

On the whole, we may conclude, that division of labour is a skil- 
ful mode of employing human agency, that it consequently multiplies 
the productions of society; in other words, the powers and the enjoy- 



CHAP. VIII. ON PRODUCTION. 103 

ments of mankind; but that it in some degree degrades the faculties of 
man in his individual capacity.(a) (1) 



CHAPTER IX. 

OF THE DIFFERENT METHODS OF EMPLOYING COMMERCIAL INDUSTRY, 
AND THE MODE IN WHICH THEY CONCUR IN PRODUCTION. 

Commodities are not all to be had in all places indifferently. 
The immediate products of the earth depend upon the local varie- 
ties of soil and climate; and even the products of industry are met 
with only in such places as are most favourable to their production. 

Whence it follows that, where products, whether of industry or 
of the earth, do not grow naturally, they can not be introduced or 
produced in a perfect state, and fit for consumption, without under- 
going a certain modification; that is to say, that of transport or con- 
veyance. 

This transfer gives occupation to what has been called commercial 
industry. 

External commerce consists of the supply of the home market 
with foreign, and of foreign markets with home products.* 

Wholesale commerce is the buying of large quantities and re- 
selling to inferior dealers. 

Retail commerce is the buying of wholesale dealers, and re-selling 
to consumers. 

* Products that are bought to be re-sold, are called merchandise i and merchan- 
dise bought for consumption is denominated commodities. (Jb) 

(a)*This consideration makes it peculiarly incumbent upon the government 
of a manufacturing nation to diffuse tbe benefits of early education, and thus 
prevent the degeneration from being intellectual as well as corporeal. T. 

(jb) This distinction has been discarded in the translation, for the sake of 
simplification; the general term products being sufficiently intelligible and 
specific. T. 

(1) ["The extensive propagation of light and refinement," says Dugald 
Gtewart, " arising from the influence of the press, aided by the spirit of com- 
merce, seems to be the remedy to be provided by nature against the fatal effects 
which would otherwise be produced, by the subdivision of labour accompanying 
the progress of the mechanical arts : nor is any thing wanting to make the 
remedy effectual, but wise institutions to facilitate general instruction, and to 
adapt the education of individuals to the stations they are to occupy. The mind 
of the artist, which from the limited sphere of his activity, would sink below 
the level of the peasant or the savage, might receive in infancy the means of 
intellectual enjoyment and the seeds of moral improvement ; and even the insipid 
uniformity of his professional engagements, by presenting no object to awaken 
his ingenuity or to distract his attention, might leave him at liberty to employ 
his faculties on subjects more interesting to himself, and more extensively useful 
to others."] 

American Editor. 



104 ON PRODUCTION. book i. 

The commerce of money or specie is conducted by the banker, 
who receives or pays on account of other people, or gives bills, or- 
ders, or letters of credit, payable elsewhere than at the place where 
they are given. This is sometimes called the banking trade. («) 

The broker brings buyers and sellers together. 

The persons engaged in these several branches are all agents of 
commercial industry, whose agency tends to approximate products 
to the hands of the ultimate consumer. The agency of the retailer 
of an ounce of pepper is quite as indispensable to the consumer, as 
that of the merchant, who despatches his vessel to the Moluccas for 
a cargo; and the only reason why these different functions are not 
both performed by one and the same individual is, because they can 
be executed with more economy and convenience by two. To enter 
minutely into an examination of the limits and practices of these 
various departments of commercial industry, would be to write a 
treatise on commerce.* All we have to do in this work is, to in- 
quire in what manner and degree they influence the production of 
values. 

In Book II., we shall see how the actual demand for a product 
originating in its utility, is limited by the amount of the cost of 
production, and upon what principle its relative value is determined 
in each particular place. At present it is sufiicient for the clear con- 
ception of commercial production, to consider the value of a product 
as a given quantity or datum. Thus, without examining the reason 
why oil of olives is worth at Marseilles thirty, and at Paris forty 
sous per lb., I shall content myself with simply stating, that who- 
ever effects the transport of that article from Marseilles to Paris, 
thereby increases its value to the amount of ten sous per lb. Nor 
is it to be supposed, that its intrinsic value has received no accession 
by the transit. The value has positively augmented. The intrinsic 
value of silver is greater at Paris than at Lima; and the cases are 
precisely similar. • 

In fact, the transport of products can not be effected without the 
concurrence of a variety of means, which have each an intrinsic 
value of their own, and of which the actual transport itself, in the 
literal and confined sense of the term, is commonly not the most 
chargeable. There must be one commercial establishment at the 

* A complete treatise on commerce is still a desideratum in literature, not- 
withstanding the labours of Melon and Forbonnais, for hitherto the principles 
and consequences of commerce have been little understood. (1) 



(a) The banker's business is not confined to dealings in metal, coined or un- 
coined, but is extended to dealings in paper-money, and dealings in credit, as 
we shall see when we come to the chapter upon money, infra. T. 

(1) The Society for the DiflFusion of Useful Knowledge, in London, in 1833, 
published a Treatise on Commerce, by J. R. M'Culloch, Esq. the eminent poli- 
tical economist, in which the general principles, practice and history of Com- 
merce, are unfolded and explained with great ability. It is a work that should 
be read by every well-educated merchant. 

American Editor. 



CHAP. IX. ON PRODUCTION. 105 

place where the products are collected; another at the place it is 
transported to; besides package and warehousing. 

There must be an advance of capital equivalent to the value trans- 
ported. Moreover, there are agents, insurers, and brokers, to be 
paid. All these are really productive occupations, since, without 
their agency, the consumer can never enjoy the product; and suppos- 
ing their remuneration to be reduced by competition to the lowest 
rate possible, he can be in no way cheaper supplied. 

In commercial, as well as manufacturing industry, the discovery 
of a more economical or more expeditious process, the more skilful 
employment of natural agents, the substitution, for instance, of a canal 
in place of a road, or the removal of a difficulty interposed by nature 
or by human institutions, reduces the cost of production, and pro- 
cures a gain to the consumer, without any consequent loss to the 
producer, who can lower his price without prejudice to himself, 
because his own outlay and advance are likewise reduced. 

The same principles govern both external and internal commerce. 
The merchant that exports silks to Germany or to Russia, and sells 
at Petersburg for 40 cents per yard, stuffs that have cost but 30 
cents at Lyons, creates a value of 10 cents per yard. If the same mer- 
chant brings a return cargo of peltry from Russia, and sells at Havre 
for 240 dollars what cost him at Riga but 200 dollars,or a value equiva- 
lent to 200 dollars, there will be a new value of 40 dollars, created and 
shared amongst the different agents engaged in this production of 
value, whatever nation they may belong to, and whatever be the rela- 
tive importance of their respective productive agency, from the first 
rate merchant to the ticket-porter inclusive.* And by this creation 
of value, the wealth of the French nation is enriched to the amount of 
all the gains of French industry and of French capital, in the course 
of this production; and the Russian nation to the amount of those of 
Russian industry and Russian capital. Nay, perhaps a third nation, 
independent both of France and of Russia, may get the whole profit 
accruing from the mutual commercial intercourse between these 
nations; and yet neither of them lose any thing, if their industry and 
capital have other equally lucrative employments at home. The 
very circumstance of the existence of an active external commerce, 
no matter what agents it be conducted by, is a very powerful stimu- 
lus to internal industry. The Chinese, who abandon the whole of 
their external commerce to other nations, must nevertheless raise an 
enormous gross product, otherwise they could never support, as they 
do, a population twice as large as that of all Europe, upon a surface 
of nearly equal extent. A shop-keeper in good business is quite as 
well off as a pedlar that travels the country with his wares on his 
back.t Commercial jealousy is, after all, nothing but prejudice: it 
is a wild fruit, that will drop of itself when it has arrived at maturity. 

* The ordinary proportions of this division will be explained, infra. Book II. 
Chan. 7. 
t It has been often asked, Why not combine commercial with agricultural and 
14 



106 ON PRODUCTION. book i. 

The external commerce of all countries is inconsiderable, com- 
pared with the internal. To convince ourselves of the truth of this 
position, it will be sufficient to take note at all numerous or even 
sumptuous entertainments, how very small is the proportion of 
values of foreign growth, in comparison with those of home produc- 
tion; especially, if we take into the account, as we ought to do, the 
value of buildings and habitations, which is necessarily of home 
production. *(«) 

The internal commerce of a country, though, from its minute 
ramification, it is less obvious and striking, besides being the most 
considerable, is likewise the most advantageous.(l) For both the 
remittances and returns of this commerce are necessarily home pro- 
ducts. It sets in motion a double production, and the profits of it 
are not participated with foreigners. For this reason, roads, canals, 
bridges, the abolition of internal duties,(6) tolls, duties on transit,(c) 
which are in effect tolls, every measure, in short, which promotes 
internal circulation, is favourable to national wealth. 

manufacturing productions 1 Why, for the same reason that makes a whole- 
sale cotton spinner, if he have a surplus of time and capital, more apt to extend 
his spinning concern, than to employ his labour and capital in the working up 
of his own filiature into muslin and printed calicos. 

* It would be impossible to estimate the proportion with any tolerable accu- 
racy, even in countries where calculations of this kind are most in vogue. In- 
deed, the attempt would be a sad waste of time. To say the truth, statistical 
statements are of little real utility ; for, be their accuracy ever so well assured, 
they can only be correct for the moment. The only knowledge really useful is, 
the knowledge of general principles and laws, that is to say, the knowledge of 
the connexion between cause and effect, which alone can safely teach us what 
measures it is best to adopt in every possible emergency. The sole use of sta- 
tistics in political economy is, to supply examples and illustrations of general 
principles. They can never be the basis of principles, which are grounded upon 
the nature of things ; whereas statistics, in the most improved state, are only an 
index of their quantity. 



(a) This position may be correct or not, according to circumstances. The 
national wants must always, in the long run, be supplied by the national indus- 
try and exertions : but what is there to prevent a nation from exchanging the 
larger portion of its domestic products for the products of other nations 1 The 
people of Tyre probably consumed more products of external than of domestic 
industry, although indeed those external must have been purchased with domes- 
tic products. Tyre, it is true, was rather a city than a nation. Holland resem- 
bled her in many particulars. The observation applies to every community, the 
chief part of whose production is, the modification of external products. T. 

(b) Douanes. (c) Octrois. 

(1) [The author has here, in common with Dr. Smith, fallen into an error. 
Capital, whether employed in the home or foreign trade, is equally productive. 
If, for example, the home trade realized greater profits than foreign commerce, 
every cent of capital employed in the latter, would in a very little time, be with- 
drawn from so comparatively disadvantageous an investment. Capital will flow 
into the foreign, instead of the home trade, only because it will thereby yield a 
larger profit. The internal commerce of a country cannot therefore be said to be 
" the most advantageous."] American Editor. 



CHAP. IX. ON PRODUCTION. 107 

There is a further branch of commerce, called the trade of specu- 
lation, which consists in the purchase of goods at one time, to be 
re-sold in the same place and condition at another time, when they 
are expected to be dearer. Even this trade is productive; its utility 
consists in the employment of capital, warehouses, care in the pre- 
servation, in short, human industry in the withdrawing from circu- 
lation a commodity depressed in value by temporary superabun- 
dance, and thereby reduced in price below the charges of production, 
so as to discourage its production, with the design and purpose of 
restoring it to circulation when it shall become more scarce, and 
when its price shall be raised above the natural price, the charges of 
production, so as to throw a loss upon the consumers. The evident 
operation of this kind of trade is, to transport commodities in respect 
of time, instead of locality. If it prove an unprofitable or losing 
concern, it is a sign that it was useless in the particular instance, and 
that the commodity was not redundant at the time of purchase, and 
scarce at the time of re-sale. This operation has also been denomi- 
nated, with much propriety, the trade of reserve.(a) Where it is 
directed to the buying up of the whole of an article, for the sake of 
exacting an exorbitant monopoly price, it is called forestalling, 
which is happily difficult, in proportion as the national commerce is 
extensive, and, consequently, the commodities in circulation both 
abundant and various. 

The carrying trade, as Smith calls it, consists in the purchase of 
goods in one foreign market for re-sale in another foreign market. 
This branch of industry is beneficial not only to the merchant that 
practises it, but also to the two nations between whom it is practised; 
and that for reasons which have been explained while treating of ex- 
ternal commerce. The carrying trade is but little suited to nations 
possessed of small capital, whereof the whole is wanted to give activ- 
ity to internal industry, which is always entitled to the preference. 
The Dutch carry it on in ordinary times with advantage, because their 
population and capital are both redundant. (6) The French, in peace 
time, have carried on a lucrative carrying trade between the different 
ports of the Levant; because adventurers could procure advances of 
capital on better terms in France than in the Levant, and were per- 
haps less exposed to the oppression of the detestable government of 
that country. They have since been supplanted by other nations, 
whose possession of the carrying trade is so far from being an injury 
to the subjects of the Porte, that it actually keeps alive the little 
remaining industry of its territories. Some governments, less wise 
in this particular than the Turkish, have interdicted their carrying 
trade to foreign adventurers. If the native traders can carry on the 

(a) Commerce de reserve. There is no corresponding term in English; it is 
intelligible enough. 

(i) The carrying trade of Holland is now almost extinct. In fact, whether or 
no it be suited to a given nation at a given time, depends upon a great variety of 
circumstances. The advantage of the neutral ciiaracter gave a very large pro- 
portion of it for some years to the American Union, though notoriously deficient 
in capital for the purposes of internal cultivation. T. 



108 ON PRODUCTION. book i. 

transport to greater profit than foreigners, there is no occasion to 
exclude the latter; and, if it can be conducted cheaper by foreigners, 
their exclusion is a voluntary sacrfice of the profit of employing 
them. An example will serve to elucidate this position. The freight 
of hemp from Riga to Havre costs a Dutch skipper, say 7 dollars per 
ton. It must be taken for granted, that no other but the Dutchman can 
carry it so cheap. He makes a tender to the French government, 
which is a consumer of Russian hemp, to provide tonnage at 8 dollars 
per ton, thereby obviously securing to himself a profit of 1 dollar per 
ton. Suppose then, that the French government, with a view to favour 
the national shipping, prefers to employ French tonnage, which can 
not be navigated for less than 10 dollars per ton, or 11 dollars, allow- 
ing the same profit to the ship-owner — What is the consequence ? The 
government will be out of pocket 3 dollars per ton, for the mere pur- 
pose of giving a profit of 1 dollar to the national ship-owners. And, 
as none but the individuals of the nation contribute towards the 
national expenditure, thisoperation will have costtooneclassof French- 
men 3 dollars for the purpose of giving to another class of Frenchmen 
a profit of 1 dollar only. However the numbers may vary, the result 
must be similar ; lor there is but one fair way of stating the account. 
It is hardly necessary to caution the reader, that I have through- 
out been considering maritime industry solely in its relation to 
national wealth. Its influence upon national security is another thing. 
The art of navigation is an expedient of war, as well as of commerce. 
The working of a vessel is a military manceuvre ; and the nation 
containing the larger proportion of seamen, is, therefore, ceteris 
paribus, the more powerful in a military point of view ; conse- 
quently, political and military considerations have always interfered 
with national views of commerce, in matters of navigation; and Eng- 
land, in passing her celebrated Navigation Act, interdicting her car- 
rying trade to all vessels, the owners and at least three-fourths of the 
crews whereof were not British subjects, had in view, not so much 
the profits of the carrying trade, as the increase of her own military 
marine, and the diminution of that of the other powers, especially of 
Holland, which then enjoyed an immense carrying trade, and was 
the chief object of English jealousy. 

Nor can it be denied, that these views may actuate a wise national 
administration ; assuming always, that it is an advantage to one 
nation to domineer over others. But these political dogmas are fast 
growing obsolete. Policy will some day or other be held to consist 
in coveting the pre-eminence of merit rather than of force. The 
love of domination never attains more than a factitious elevation, that 
is sure to make enemies of all its neighbours. It is this that engen- 
ders national debt, internal abuse, tyranny and revolution; while the 
sense of mutual interest begets international kindness, extends the 
sphere of useful intercourse, and leads to a prosperity, permanent, 
because it is natural. (1) 

(1) [The operation of the British Navigation-acts, like all other restrictive re- 
gulations, has been prejudicial to the growth of national wealth, without, at the 
same time, having contributed, in any degree to the establishment of the naval 



CHAP. X. ON PRODUCTION. 109 



CHAPTER X. 

OF THE TRANSFORMATIONS UNDERGONE BY CAPITAL IN THE PRO- 
GRESS OF PRODUCTION. 

We have seen above (Chap. III.) of what the productive capital of 
a nation consists, and to what uses it is applicable. So much it was 
necessary to specify, in ennumerating the various means of produc- 
tion. We now come to consider and examine, what becomes of 
capital in the progress of production, and how it is perpetuated and 
increased. 

To avoid fatiguing the reader with abstract speculation, I shall 
begin with giving examples, which I shall take from every day's 
experience and observation. The general principles will follow of 
themselves, and the reader will immediately see their applicability 
to all other cases, which he may have occasion to pronounce a judg- 
ment upon. 

When the land-owner is himself the cultivator, he must possess a 
capital over and above the value of his land; that is to say, value to 
some amount or other consisting, in the first place, of clearance of the 
ground, together with works and erections thereon, which may at 
pleasure be looked upon as part of the value of the estate, but which 

preponderance of Great Britain. " If it can be made to appear," says a highly 
distinguished political economist, "that the greater wealth which we should, in 
the absence of these laws, have possessed, would have supplied a revenue ade- 
quate to the maintenance of an equal number of seamen in the navy, it would 
follow that we are no gainers by these acts; and if it further appear that this ad- 
ditional revenue would have been equal to the maintenance of twice or three 
times as many seamen, it would he clear that we are losers by them. It is acknow- 
ledged by many of the advocates for these laws, that theirtendency has not been 
to increase the national revenue, but in some degree the reverse. 

" Our national preponderance," says, we believe Mr. Horner, "rests on a very 
different basis. Our national energy and wealth originate in our freedom, and 
in that security of property which is its happy consequence. The number of 
our seamen in merchant shipping is owing to the spirit and capital of our tra- 
ders, and to our great extent of coast. The magnitude of our navy is due neither 
to navigation-acts, nor to colonial monopolies, but to the resources of an indus- 
trious country. 

" How different are the ideas suggested by such observations, from the narrow 
theories of those who trace our naval superiority to the operation of a few acts 
of Parliament! They remind us of the technical philosophy of the judge, who 
gravely ascribed the lamentable prevalence of duelling, not to the violence of 
human passions, but to a misapprehension of the law of the land ! Besides, our 
naval greatness, as it is well remarked by Dr. Smith, was conspicuous before 
our navigation laws were framed. It existed then, as it had done before, and 
has done since, in a degree commensurate with our commerce, and with the ex- 
tent of our national prosperity. These circumstances, and not navigation laws, 
will be found the regulators of naval power in all countries. They determine 
its extent among the Dutch, to whom, even in the season of their greatest strength, 
navigation laws were entirely unknown." Vide Edinburgh Review, vol. xiv. 
page 95.] 

American Editor. 



110 ON PRODUCTION. book i. 

are, nevertheless, the result of previous human exertion, and an ac- 
cession to the original value of the land. * 

This portion of his capital is little subject to wear and tear; trifling 
occasional repairs will preserve it entire. If the cultivator obtain 
from the annual produce wherewithal to effect these repairs, this 
item of capital is thereby preservable in perpetuity. 

Ploughs, and other farming implements and untensils, together 
with the animals employed in tillage, form another item of the culti- 
vator's capital, and an article of much quicker consumption, which, 
however, may in like manner be kept up and renovated, as occasion 
may require, at the expense of the annual produce of the concern, 
and thus be maintained at its full original amount. 

Finally, he must have stores of various kinds; seeds for his ground, 
provisions, fodder for his cattle, and food as well as money for his 
labourers' wages, &c.t Observe, that this branch of capital is totally 
decomposed once in the course of the year at least; and sometimes 
three or four times over. The money, grain and provisions of eve- 
ry description disappear altogether; but so it must necessarily be, 
and yet not an atom of the capital is lost, if the cultivator, after 
abstracting from the produce a fair allowance for the productive 
service of his land (rent) for the productive service of the capital 
embarked (interest) and for the productive service of the personal 
labour that basset the whole in motion (wages,) contrive to make the 
annual produce replace the outlay of money, seed, live stock, &c., 
even to the article of manure, so as to put himself in possession of a 
value equal to what he started with the preceding year. 

Thus we find, that capital may yet be kept up, though almost 
every part of it have undergone some change, and many parts be 
completely annihilated; for, indeed, capital consists not in this or 
that commodity or substance, but in its value. 

Nor is it difficult to conceive, that if the estate be sufficiently 
extensive, and managed with order, economy, and intelligence, the 
profits of the cultivator may enable him to lay by a surplus, after 
replacing the entire value of his capital, and defraying the expenses 
of himself and family. The mode of disposing of this surplus is of 
the utmost importance to the community, and will be treated of in 
the next chapter. All that is at present necessary is, to impress a 

* Arthur Young, in his View of the Agriculture of France, makes no estimate 
ofthisitemof capital permanently vested in the land of France within its old 
limits; but merely reckons it to be less than the capital so vested in England, in 
the proportion of 36 livres tournois per English acre. So that, in the very mode- 
rate supposition, that half as much capital is vested in permanent amelioration of 
the land in France as in England, the capital so vested in Old France, reckoned 
at 7 dollars per acre, would amount, upon 131 millions of acres, to 817 millions 
of dollars for this item of French capital alone. 

t The same writer (Young) estimates, that in France, these two last items of 
capital, viz. implements, beasts of husbandry, stores of provisions, &c. may be 
set down at 9 dollars per acre, one acre with another; making an aggregate of 
1179 millions of dollars; which, added to the former estimate, shows a total of 
1996 millions of dollars, capital engaged in the agricultural industry of Old 
France. He estimates the same items of capital in England at twice as much 
per acre. 



cHAP.x. ON PRODUCTION. Ill 

clear conviction, that the value of capital, though consumed, is nol 
yet destroyed, wherever it has been consumed in such way as to re- 
produce itself; and that a concern may go on forever, and annually 
render a new product with the same capital, although that capital be 
in a perpetual course of consumption. 

After tracing capital through its various transformations in the 
department of agriculture, it will be easy to follow its transforma- 
tions in the other two departments of manufacture and commerce. 

In manufacture, as well as agriculture, there are some branches of 
capital that last for years; buildings and fixtures for instance, machi- 
nery and some kinds of tools; others, on the contrary, lose their 
form entirely; the oil and pot-ash used by soap-makers cease to be 
oil and pot-ash when they assume the form of soap. In the same 
manner, the drugs employed in dying indigo cease to be Brazil 
wood or annatto, as the case may be, and are incorporated with the 
fabric they are employed in colouring. And so of the wages and 
maintenance of the labourers. 

In commerce, almost the whole capital undergoes complete trans- 
mutation, and many items of it several times in the course of a year. 
A merchant exchanges his specie for woollens or jewellery, which is 
one change of form. He ships them for Turkey, and on the voyage, 
some more of his money is converted into the wages of the crew. 
The cargo arrives at Constantinople, where he sells the investment 
to the wholesale dealers, who pay him in bills upon Smyrna, which 
is a second metamorphosis; the capital embarked is now in the shape 
of bills, which he makes use of in the purchase of cotton at Smyrna; 
a third transformation. The cotton is shipped for France and sold 
there, which completes the fourth change of form; thus reproducing 
the capital, most probably with profit, under its original shape of 
French coin. 

It is obvious, that the objects capable of acting the part of capital 
are innumerable. If, at any given period, one wished to know 
what the capital of a nation consisted of, it would be found composed 
of an infinity of objects, commodities and substances, of which it 
would be impossible to guess the aggregate value with any tolerable 
accuracy, and of which some are situated many thousand leagues 
from its frontiers. At the same time, it appears that the most in- 
significant and perishable articles are a part, and often a very im- 
portant part, too, of the national capital; that although the items of 
capital are in a continual course of consumption and decomposition, 
it by no means follows, that the capital itself is destroyed and con- 
sumed, provided that its value be preserved in some other shape; 
consequently, that the introduction or import of the vilest and most 
perishable commodities may be just as profitable as that of the most 
costly and durable — gold or silver; that, in fact, the former, are 
more profitable the instant they are more sought after; that the pro- 
ducers themselves are the only competent judges of the transforma- 
tion, export, and import, of these various matters and commoditiesj 



112 ON PRODUCTION. book i. 

and that every government which interferes, every system calculated 
to influence production, can only do mischief. 

There are concerns, in which the capital is completely renovated, 
and the work of production begun afresh, several times in the year. 
An operation of manufacture, that can be perfected and the product 
sold in three months, will admit of the capital being turned to 
account annually four times. It may be supposed that the profit 
each time is less than when the capital is turned but once in twelve 
months. Were it otherwise, there would be four times the profit 
gained; an advantage that would soon attract an overflow of capital 
in this particular channel, and lower the profit by competition. On 
the other hand, products that it requires more than a year to perfect, 
such as leather, must, over and above the original capital, yield the 
profits of more than one year; otherwise, who could undertake to 
raise them ? 

In the trade of Europe with China and the East Indies, the capi- 
tal embarked is two or three years before its return. Nor is it ne- 
cessar)'^ in commerce or in manufacture, any more than in agricul- 
ture, which has been cited as an example, that the capital should be 
realized in the form of money, to be entirely replaced. Merchants 
and manufacturers, for the most part, realize in this way the whole 
of their capital but once in their lives, and that is when they wind 
up and leave ofi" business. Yet they are at no loss to discover at any 
time whether their capital be enlarged or diminished, by referring to 
the inventory of their assets for the time being. 

The capital employed on a productive operation is always a mere 
advance made for payment of productive services, and re-imbursed 
by the value of their resulting product. 

The miner extracts the ore from the bowels of the earth; the 
iron-founder pays him for it. Here ends the miner's production, 
which is paid for by an advance out of the capital of the iron-foun- 
der. This latter next smelts the ore, refines and makes it into steel, 
which he sells to the cutler: thus is the production of the founder 
paid, and his advance reimbursed by a second advance on the part 
' of the cutler, made in the price for the steel. This again the cutler 
works up into razor-blades, the price for which replaces his advance 
of capital, and at the same time pays for his productive agency. 

It is manifest, then, that the value of the ultimate product, razor- 
blades, has been sufficient to replace all the capital successively em- 
ployed in its production, and, at the same time, to pay for the pro- 
duction itself; or rather, that the successive advances of capital have 
paid for the productive services, and the price of the product has 
reimbursed those advances; which is precisely the same thing as if 
the aggregate or gross value of the product had gone immediately to 
defray the charges of its production. 



CHAP. XI. ON PRODUCTION. 113 

CHAPTER XI. 

OF THE FORMATION AND MULTIPLICATION OF CAPITAL. 

In the foregoing chapter, I have shown how productive capital, 
though kept, during the progress of production, in a continual state 
of employment, and subject to perpetual change and wear, is yet 
ultimately reproduced in full value, when the business of production 
is at an end. Since, then, wealth consists in the value of matter or 
substance, not in the substance or matter itself, I trust my readers 
have clearly comprehended, that the productive capital employed, 
notwithstanding its frequent transmutations, is all the while the same 
capital. 

It will be conceived with equal facility, that, inasmuch as the value 
produced has replaced the value consumed, that produced value may- 
be equal, inferior, or superior in amount, to the value consumed, 
according to circumstances. If equal, the capital has been merely 
replaced and kept up; if inferior, the capital has been encroached 
upon; but if superior, there has been an actual increase and accession 
of capital. This is precisely the point to which we traced the culti- 
vator, cited by way of an example in the preceding chapter. We 
supposed him, after the complete re-establishment of his capital, so 
as to put him in a condition to begin the new year's cultivation with 
equal means at his disposal, to have netted a surplus produce beyond 
his consumption of some value or other; say of 1000 dollars. 

Now, let us observe the various methods, in which he may dispose 
of this surplus of 1000 dollars; for simple as the matter may appear 
to be, there is no point upon which more error has prevailed^ or 
which has greater influence upon the condition of mankind. 

Whatever kind of produce this surplus, which we have valued at 
1000 dollars, may consist of, the owner may exchange it for gold or 
silver specie, and bury it in the earth till he wants it again. Does 
the national capital sufier a loss of 1000 dollars by this operation ? 
Certainly not; for we have just seen, that the value of that capital 
was before completely replaced. Has any one been injured to that 
amount? By no means; for he has neither robbed nor cheated any 
body, and has received no value whatever, without giving an equiva- 
lent. It may be said, perhaps, he has given wheat in exchange for 
the dollars he has thus buried, which wheat was very soon con- 
sumed; yet the 1000 dollars still continue withdrawn from the 
capital of the community. But I trust it will be recollected, that 
wheat, as well as silver or gold, may compose a part of the national 
capital; indeed, we have seen that national capital must necessarily 
consist, in a great measure, of wheat and such like substances, liable 
to either partial or total consumption, without any diminution of 
capital thereupon; for, in short, that z-eproduction completely replaces 
tlie value consumed, including the profits of the producers, whose 
15 



114 ON PRODUCTION. book i. 

productive agency is part of the value consumed. Wherefore, the 
instant that the cultivator has fully replaced his capital, and begins 
again with the same means as before, the 1000 dollars may be 
thrown into the sea without reducing the national capital. 

But let us trace the disposal of this surplus of 1000 dollars to 
every imaginable destination. Suppose, for instance, that instead of 
being buried, they have been spent by the cultivator upon an elegant 
entertainment. In this case, this whole value has been destroyed in 
an afternoon; a sumptuous feast, a ball, and fireworks, will have 
swallowed up the whole. The value thus destroyed exists no longer 
in the community; it no longer forms an item in the aggregate of 
wealth; for those persons, into whose hands the identical pieces of 
silver have come, have given an equivalent in wines, refreshments, 
eatables, gunpowder, &c., all which values are reduced to nothing; 
the gross national capital, however, is no more diminished in this 
case than in the former. A surplus value had been produced; and 
this surplus is all that has been destroyed, so that things remain just 
as they were. 

Again, suppose these 1000 dollars to have been spent in the pur- 
chase of furniture, plate, or linen. Still there is no reduction of 
national productive capital; although it must be allowed there is no 
accession; for in this case, nothing more is gained than the additional 
comforts the cultivator and his family derive from the newly pur- 
chased movables. 

Fourthly and lastly, suppose the cultivator to add this excess of 
1000 dollars to his productive capital, that is to say, to re-employ it 
in increasing the productive powers of his farm as circumstances may 
require, in the purchase of more beasts of husbandry, or the hire and 
support of more labourers; and in consequence, at the end of the 
year, to gather produce enough to replace the full value of the 1000 
dollars, with a profit, in such manner as to make them capable of 
yielding a fresh product the year after, and so on every year to eter- 
nity. It is then, and then only, that the productive capital of the 
community is really augmented to that extent. 

It must on no account be overlooked, that, in one way or other, a 
saving such as that we have been speaking of, whether expended 
productively or unproductively, still is in all cases expended and 
consumed; and this is a truth, that must remove a notion extremely 
false, though very much in vogue — namely, that saving limits and 
injures consumption. No act of saving subtracts in the least from 
consumption, provided the thing saved be re-invested or restored to 
productive employment. On the contrary, it gives rise to a con- 
sumption perpetually renovated and recurring; whereas there is no 
repetition of an unproductive consumption. («) 

(a) On the subject of saving, Sismondi, and after him our own Malthas, have 
adopted a different opinion. According to them the powers of production have 
already outrun the desire and the ability to consume; consequently, every thing 
that tends to reduce that desire is injurious, because it is already too inert for 
the interests of production. Wherefore, inasmuch as the desire of accumulation 



CHAP. XI. ON PRODUCTION. 115 

It must be observed, too, that the form in which the value saved 
is so saved and re-employed productively, makes no essential differ- 
ence. The saving is made with more or less advantage, according 
to the circumstances and intelligence of the person making it. Nor 
is there any reason why this portion of capital should not have been 
accumulated, without ever having for a moment assumed the form of 
specie. It may be that an actual product of the farm has been saved 
and resown or planted, without having undergone any transmutation; 
perhaps the wood, that might have been used as firing to warm su- 
perfluous apartments, may have been converted into pailings or other 
carpenter's work; and what was cut down in the first instance as an 
item of revenue, be so employed, as to become an item of capital. 

Now, the onli/ way of augmenting the productive capital of indi- 
viduals, as well as the aggregate productive capital of the community, 
is by this process of saving; in other words, of re-employing in 
production more products created than have been consumed in their 
creation. Productive capital cannot be accumulated by the mere scra- 
ping together of values without consuming them; nor any otherwise, 
than by withdrawing them from unproductive, and devoting them 
to reproductive consumption. There is nothing odious in the real 
picture of the accumulation of capital; we shall presently see its happy 
consequences. 

is the direct opposite of that of consumption, it must of necessity be injurious in 
the highest degree. On these principles, it might be proved without difficulty, 
that the prodigality of public authority, war, or the poor law of England, is a 
national benefit : for all of them stimulate consumption. Indeed they leave their 
readers to draw this inevitable conclusion; for they maintain in plain terms, that 
the enlargement of the productive powers of man, by the use of machinery or 
otherwise, makes the existence of unproductive consumers a matter, not of mere 
possibility or probability, but of actual necessity and expedience. ( Vide Sis- 
mondi, Nouv. Frin. liv. ii. c. 3 and liv. iv. c. 4. Malthus, Prin. of Pol. Econ.') 
These maxims would justify the prodigality of Louis XIV. of France, and of 
the Pitt system of England. But fortunately they are erroneous ; and if the con- 
trary principles laid down by our author here and infra. Chap. XV, needed fur- 
ther illustration, or support they have been rendered still more clear and convinc- 
ing by his recent Leitres a M. Malthus. — It is true, that the enlargement of 
productive power naturally leads to the multiplication of unproductive consumers : 
why] because the desire of barren consumption, instead of being inert, is always 
active in the human breast. But that multiplication is not necessary; for the 
consumer may be made a producer, if not of material, at least of immaterial pro- 
ducts, which latter are capable of infinitely more multiplication and variety, as 
well as of more general diffusion than material products. While this field re- 
mains open, a national administration never need despair of finding occupation 
for the human labour supplanted by machinery. And what is the parsimony of 
modern days ■? It is not the hoarding of coin or other valuables, which, though 
as our author observes, it subtracts nothing from the national capital, is yet a 
social mischief, because it suspends the utility of an existing product, or at any 
rate, prevents it from yielding the human gratification, which its barren consump- 
tion would afford. The accumulations of the miser are now either vested in 
reproduction which is beneficial, or in the ownership of the sources of production, 
land, &c. &c. which it matters not to public wealth who may be possessed of, 
or in the incumbrances of those sources, mortgages, national funds, &c. &c., 
which are but portions of that ownership, and to which the same observation 
applies. T. 



116 ON PRODUCTION. book i. 

The form under which national capital is accumulated, is com- 
monly determined by the Respective geographical position, the 
moral character, and the peculiar wants of each nation. The accu- 
mulations of a society in its early stages consist, for the most part, 
of buildings, implements of husbandry, live-stock, improvements of 
land; those of a manufacturing people chiefly of raw materials, or 
such as are still in the hands of its workmen, in a more or less finish- 
ed state; and in some part, of the necessary manufacturing tools and 
machinery. In a nation devoted to commerce, capital is mostly 
accumulated in the form of wrought or un wrought goods, that have 
been bought by the merchant for the purpose of re-sale. 

A nation that at the same time directs its energies to all three 
branches of industry, namely, agriculture, manufactures, and com- 
merce, has a capital compounded of all these different forms of pro- 
duction; of that amazing quantity of stores of every kind, that we 
find civilized society actually possessed of; and which, by the intel- 
ligent use that is made of them, are constantly renovated, or even 
increased, in spite of their enormous consumption, provided that the 
industry of the community produces more than is destroyed by its 
consumption. 

I do not mean to say, that each nation has produced and laid by 
the identical article that composes its actual capital. Values, in some 
shape or other, have been produced and laid by; and these, through 
various transmutations, have assumed the form most convenient for 
the time being. A bushel of wheat saved will feed a mason as well 
as a worker in embroidery. In the one case, the bushel of wheat 
will be reproduced in the shape of the masonry of a house; in the 
other, under that of a laced suit. 

Every adventurer in industry, that has a capital of his own em- 
barked in it, has ready means of employing his saving productively; 
if engaged in husbandry, he buys fresh parcels of land; or, by judi- 
cious outlays and improvements, augments the productive powers of 
what already belongs to him; if in trade, he buys and sells a greater 
quantity of merchandise. Capitalists have nearly the same advan- 
tage: they invest their whole savings in the same manner as their 
former capital is invested, and increase it pro tanto, or look out for 
new ways of investment, which they are at no loss to discover; for 
the moment they are known to be possessed of loose funds, they 
seldom have to wait for propositions for the employment of them; 
^yhereas the proprietors of lands let out to farm, and individuals that 
live upon fixed income, or the wages of their personal labour, have 
not equal facility in the advantageous disposal of their savings, and 
can seldom invest them till they amount to a good round sum. 
Many savings are therefore consumed, that might otherwise have 
swelled the capitals of individuals, and consequently of the nation at 
large. Banks and associations, whose object is to receive, collect, 
and turn to profit the small savings of individuals, are consequently 
very favourable to the multiplication of capital, whenever they are 
perfectly secure. 



CHAP. XI. ON PRODUCTION. 117 

The increase of capital is naturally slow of progress: for it can 
never take place without actual production of value, and the creation 
of value is the work of time and labour, besides other ingredients.* 
Since the producers are compelled to consume values all the while 
they are engaged in the creation of fresh ones, the utmost they can 
accumulate, that is to say, add to reproductive capital, is the value 
they produce beyond what they consume; and the sum of this sur- 
plus is all the additional wealth that the public or individuals can 
acquire. The more values are saved and reproductively employed 
in the year, the more rapid is the national progress towards pros- 
perity. Its capital is swelled, a larger quantity of industry is set in 
motion, and saving becomes more and more practicable, because the 
additional capital and industry are additional means of production. 

Every saving or increase of capital lays the groundwork of a per- 
petual annual profit, not only to the saver himself, but likewise to all 
those whose industry is set in motion by this item of new capital. It 
is for this reason that the celebrated Adam Smith likens the frugal 
man, who enlarges his productive capital but in a solitary instance, 
to the founder of an almshouse for the perpetual support of a body 
of labouring persons upon the fruits of their own labour; and on the 
other hand, compares the prodigal that encroaches upon his capital, 
to the roguish steward that should squander the funds of a charitable 
institution, and leave destitute, not merely those that derived present 
subsistence from it, but likewise all who might derive it hereafter. 
He pronounces without reserve every prodigal to be a public pest, 
and every careful and frugal person to be a benefactor of society.! 

It is fortunate, that self interest is always on the watch to preserve 
the capital of individuals; and that capital can at no time be with- 
drawn from productive employment, without a proportionate loss of 
revenue. 

Smith is of opinion, that, in every country, the profusion and igno- 
rance of individuals and of the public authorities, is more than com- 
pensated by the prevalent frugality of the people at large, and by 

* The savings of a rich contractor, of a swindler or cheat, of a royal favourite, 
saturated with grants, pensions, and unmerited emoluments, are actual accumu- 
lations of capital, and are sometimes made with facility enough. But the values 
thus amassed by a privileged few, are, in reality, the product of the labour, 
capital and laud, of numbers, who might, themselves have made the saving, and 
turned it to their own account, but for the spoliation of injustice, fraud, or vio- 
lence. 

■j- Wealth of Nations, b. ii. c. 3. Lord Lauderdale, in a work entitled, "Enqtiiri/ 
into the Nature and Origin of Public Wealth" has proved to his own conviction, 
in opposition to Smith, that the accumulation of capital is adverse to the increase 
of wealth: grounding his argument on the position that such accumulation with- 
draws from circulation values which would be serviceable to industry. But this 
position is untenable. Neither productive capital, nor the additions made to it, 
are withdrawn from circulation ; otherwise they would remain inactive, and yield 
no profit whatever. On the contrary, the adventurer in industry, who makes use 
of it, employs, disposes of, and wholly consumes it, but in a way that re-produces 
it, and that with profit. I have noted this error of his lordship, because it has 
been made the basis of other works on political economy, which abound in false 
conclusions, having set out on this false principle. 



118 ON PRODUCTION. book i. 

their careful attention to their own interests.* At least it seems 
undeniable, that almost all the nations of Europe are at this moment 
advancing in opulence; which could not be the case, unless each of 
them, taken in the aggregate, produced more than it consumed 
unproductively.t Even the revolutions of modern times appear to 
have been rather favourable than otherwise to the progress of opu- 
lence; for they are no longer, as in ancient days, followed by contin- 
ued hostile invasion, or universal and protracted pillage; whereas, 
on the other hand, they have commonly overthrown the barriers of 
prejudice, and opened a wider field for talent and enterprise. But 
it is still a question, whether this frugality, which Smith gives indi- 
viduals credit for, be not, in the most numerous classes of society, a 
forced consequence of a vicious political organization. Is it true, 
that those classes receive their fair proportion of the gross produce, 
in return for their productive exertions? How many individuals 
live in constant penury, in the countries considered as the most 
wealthy! How many families are there, both in town and country, 
whose whole existence is a succession of privations; who, with every 
thing around them to awaken their desires, are reduced to the satis- 
faction of the very lowest wants, as if they lived in an age of the 
grossest barbarism and national poverty ! 

Thus I am forced to infer, that, though unquestionably there is an 
annual saving of produce in almost all the nations of Europe, this 
saving is extorted much more commonly from urgent and natural 
wants, than from the consumption of superfluities, to which policy 
and humanity would hope to trace it. Whence arises a strong sus- 
picion of some radical defect in the policy and internal economical 
systems of most of their governments. 

Again, Smith thinks that the moderns are indebted for their com- 
parative opulence, rather to the prevalence of individual frugality, 

* Wealth of Nations, b. ii. c. 3. 

f Except during the continuance of ruinous wars, or excessive public extra- 
vagance, such as occurred in France under the domination of Napoleon. It can- 
not be doubted, that, at that disastrous period of her history, even in the moments 
of her most brilliant military successes, the amount of capital dilapidated exceed- 
ed the aggregate of savings. Requisitions and the havoc of war, in addition to 
the compulsory expenditure of individuals, and the pressure of exorbitant taxa- 
tion, must unquestionably have destroyed more values than the exertions of 
individual economy could devote to reproductive investment. This sovereign, 
wholly ignorant of political economy himself, and consequently affecting to 
despise its suggestions, encouraged his courtiers, like himself, to squander the 
enormous revenues derived from his favour, in the apprehension that wealth 
might make them independent.(l) 

(1) [We are told by Dr. Bowring and Mr. Villiers, in their valuable report on 
the Commercial Relations between France and Great Britain, published during 
the present year (1834), that the best authorities agree in declaring that the 
national riches of France were greatly diminished by the Imperial Regime, and, 
probably, a much larger amount was sacrificed in increased prices and diminish- 
ed trade than was lost by the more direct operation of Napoleon's policy.] 

American Editor. 



CHAP. XI. ON PRODUCTION. 119 

than to the enlargement of productive power. I admit, that some 
absurd kinds of profusion are more rare now-a-days than formerly;* 
but it should be recollected, that such profusion can never be prac- 
tised, except by a very small number of persons; and if we take 
the pains to consider how widely the enjoyment of a more abundant 
and varied consumption is diffused, particularly among the middle 
classes of society, I think it will be found, that consumption and fru- 
gality have increased both together; for they are by no means incom- 
patible. How many concerns are there in every branch of industry, 
that, in times of prosperity, yield enough produce to the adventurers 
to enable them to enlarge both their expenses and their savings? 
What is true of one particular concern, may possibly be true of the 
national production in the aggregate. The wealth of France was 
progressively increasing during the first forty years of the reign of 
Louis XIV., in spite of the profusion, public and private, that the 
splendour of the court occasioned. The stimulus given to produc- 
tion by Colbert, multiplied her resources faster than the court squan- 
dered them. Some people supposed, that this very prodigality was 
the cause of their multiplication; the gross fallacy of which notion 
is demonstrated by the circumstance, that, after the death of that 
minister, the extravagancies of the court continuing at the same rate, 
and the progress of production being unable to keep pace with them, 
the kingdom was reduced to an alarming state of exhaustion. The 
close of that reign was the most gloomy that can be imagined. 

After the death of Louis XIV., the public and private expendi- 
ture of France have been still further increasing;t and to me it ap- 

* It is not, however, to be supposed, that the internal economy of ancient and 
of modern states is so widely different as some may be led to imagine. There 
is a striking similarity between the rise and fall of the opulent cities of Tyre, 
Carthage, and Alexandria, and those of the Venetian, Florentine, Genoese, and 
Dutch republics. The same cause must ever be attended with the same effect. 
We read of the wonderful riches of Crcesus, king of Lydia, even before his 
conquest of some neighbouring states: whence we may infer, that the Lydians 
were an industrious and frugal people : for a king can draw his resources solely 
from his subjects. The dry study of political economy would lead to this infer- 
ence ; but it happens to be also confirmed by the historical testimony of Justin, 
who calls the Lydians a people once powerful in the resources of industry; (gens 
industrid quondam potens ;) and gives a notion of their enterprising character, 
when he tells us, that Cyrus did not complete their subjugation, until he had 
habituated them to indolence, gaming and debauchery. {Jussique cauponias et 
ludicras artes et lenocinia exercere.) It is clear, therefore, that they must have 
before been possessed of the opposite qualities. Had Crcesus not taken a turn 
for pomp and military renown, he would probably have remained a powerful 
monarch, instead of ending his days in misfortune. The art of connecting cause 
with effect, and the study of political economy, are probably as conducive to the 
personal welfare of kings, as to that of their subjects. 

f This increase of expenditure has been not altogether nominal, and consequen- 
tial upon the reduction in the standard of the silver coinage of France ; a greater 
quantity and variety of products were consumed, and those of a better and more 
expensive quality. And though refined silver is now intrinsically worth nearly 
as much as in the days of Louis XIV., since the same weight of silver is given 
for the same quantity of wheat; yet the same ranks of society now actually ex- 
pend more silver in weight as well as in denomination. 



120 ON PRODUCTION. book i. 

pears indisputable, that her national wealth has advanced likewise: 
Smith himself admits that it did; and what is true of France is so of 
most of the other states of Europe in some degree or other, 

Turgot* falls in with Smith's opinion. He expresses his belief, 
that frugality is more generally prevalent now than in former times, 
and gives the following reasons: that, in most European countries, 
the interest of money was, on the average, lower than it had ever 
before been, a clear proof of the greater abundance of capital; there- 
fore, that, greater frugality must have been exerted in the accumula- 
tion of that capital, than at any former period: and, certainly, the 
low rate of interest proves the existence of more abundant capital; 
but it proves nothing with regard to the manner of its acquirement: 
in fact it may have been acquired just as well by enlarged produc- 
tion as by greater frugality, as I have just been demonstrating. 

However, I am far from denying, that in many particulars, the 
moderns have improved the art of saving as well as that of producing. 
A man is not easily satisfied with less gratifications than he has been 
accustomed to; but there are many which he has learnt to procure at 
a cheaper rate. For instance, what can be more beautiful than the 
coloured furniture papers that adorn the walls of our apartments, 
combining the graces of design with the freshness of colouring? For- 
merly, many of those classes of society that now make use of paper 
hangings, were content with whitewashed walls, or a coarse ill-exe- 
cuted tapestry, infinitely dearer than the modern paperings. By 
the recent discovery of the efficacy of sulphuric acid in destroying 
the mucilaginous particles of vegetable oils, they have been rendered 
serviceable in lamps on the Argand principle of a double current of 
air, which before could only be lighted with fish oil, twice or thrice 
as dear. This discovery has of itself placed the use of those lamps, 
and the fine light they give, within reach of almost every class.t 

For this improvement in frugality, we are indebted to the advances 
of industry, which has, on the one hand, discovered a great number 
of economical processes; and, on the other, every where solicited 
the loan of capital, and tempted the holders of it, great or small, by 
better terms and greater security. In times when little industry 
existed, capital, being unprofitable, was seldom in any other shape 
than that of a hoard of specie locked up in a strong box, or buried in 
the earth as a reserve against emergency: however considerable in 
amount, it yielded no sort of benefit whatever, being in fact little 
else than a mere precautionary deposit, great or small. But the 
moment that this hoard was found capable of yielding a profit pro- 
portionate to its magnitude, its possessor had a double motive for 
increasing it, and that not of remote or precautionary, but of actual, 

* Reflex sur la Form, et la Distrib. des Rich. § 81. 

t It is to be feared, that taxation will ultimatelj deprive the consumer of the 
advantage of such improvements. The increase of the internal taxes {droits 
remiis), of the stamps on patents, of the taxes and impediments affecting the 
internal transport of commodities, have already brought the price of these vege- 
table oils almost to a par with the article they had so beneficially supplanted. 



CHAP. XI. ON PRODUCTION. 121 

immediate benefit; since the profit yielded by the capital might, 
without the least diminution of it, be consumed and procure addi- 
tional gratifications. Thenceforward it became an object of greater 
and more general solicitude than before, in those that had none to 
create, and in those that had one to augment, productive capital; and 
a capital, bearing interest began to be regarded as a property equally 
lucrative, and sometimes equally substantial with land yielding rent. 
To such as regard the accumulation of capital as an evil, insomuch as 
it tends to aggravate the inequality of human fortune, I would sug- 
gest, that, if accumulation has a constant tendency to the multiplying 
of large fortunes, the course of nature has an equal tendency to divide 
them again. A man, whose life has been spent in augmenting his 
own capital and that of his country, must die at last, and the succes- 
sion rarely devolves upon a sole heir or legatee, except where the 
national laws sanction entails and the right of primogeniture. In 
countries exempt from the baneful influence of such institutions, 
where nature is left to its own free and beneficent action, wealth is 
naturally diff'used by subdivision through all the ramifications of the 
social tree, carrying health and life to the furthest extremities.* 
The total capital of the nation is enlarged at the same time that the 
capital of individuals is subdivided. 

Thus, the growing wealth of an individual, when honestly acquired 
and reproductively employed, far from being viewed with jealous 
eyes, ought to be hailed as a source of general prosperity. I say 
honestly acquired, because a fortune amassed by rapine or extortion 
is no addition to the national stock; it is rather a portion of capital 
transferred from the hands of one man, where it already existed, to 
those of another, who has exerted no productive industry. On the 
contrary, it is but too common, that wealth ill-gotten is ill-spent also. 

The faculty of amassing capital, or, in other words, value, I appre- 
hend to be one cause of the vast superiority of man over the brute 
creation. Capital, taken in the aggregate, is a powerful engine con- 
signed to^the use of man alone. He can direct towards any one 
channel of employment the successive accumulations of many gene- 
rations. Other animals can command, at most, no more than their 

* It is to be regretted that people should be so little attentive to merit in their 
testamentary dispositions. There is always a degree of discredit thrown upoa 
the memory of a testator, by his bounty to an unworthy object; and, on the coti- 
trar)', nothing endears him more to the survivors than a bequest dictated by public 
spirit, or the^love of private virtue. Tlie foundation of a hospital, of an establish- 
ment for the education of the poor, of a perpetual premium for good actions, or a 
bequest to a writer of eminent merit, extends the influence of the wealthy beyond 
the limits of mortality, and enrols his name in the records of honour.(a) 

(a) This laudable ambition is always proportionate to the wealth, the civil 
liberty, and the intelligence of a nation. In England, scarcely a year passes 
over our heads without more than one instance of useful and extensive muni- 
ficence. The bequests to the elder Pitt, to Wilberforce, and other public inen, 
the frequent foundations and enlargements of intitutions of relief or education, 
reflect equal honour on the character of the nation, and the memory of the indi- 
viduals. T. 

16 



122 ON PRODUCTION. book i. 

respective individual accumulations, scraped together in the course 
of a few days, or a season at the utmost, which can never amount to 
any thing considerable: so that, granting them a degree of intelli- 
gence they do not seem possessed of, that intelligence would yet 
remain ineffectual, for want of the materials to set it in motion. 

Moreover, it may be remarked, that the powers of man, resulting 
from the faculty of amassing capital, are absolutely indefinable; 
because there is no assignable limit to the capital he may accumu- 
late, with the aid of time, industry, and frugality. 



CHAPTER XII. 

OF UNPRODUCTIVE CAPITAL. 

We have seen above, that values once produced may be devot- 
ed, either to the satisfaction of the wants of those who have acquired 
them, or to a further act of production. They may also be with- 
drawn both from unproductive consumption and from reproductive 
employment, and remain buried or concealed. 

The owner of values, in so disposing of them, not only deprives 
himself of tlie self-gratification he might have derived from their 
consumption, but also of the advantage he might draw from the 
productive agency of the value hoarded. He furthermore withholds 
from industry the profits it might make by the employment of that 
value. 

Amongst abundance of other causes of the misery and weakness 
of the countries subjected to the Ottoman dominion, it cannot be 
doubted, that one of the principal is, the vast quantity of capital 
remaining in a state of inactivity. The general distrust and uncer- 
tainty of the future induce people of every rank, from the peasant 
to the pacha, to withdraw a part of their property from ifie greedy 
eyes of power: and value can never be invisible, without being inac- 
tive. This misfortune is common to all countries, where the govern- 
ment is arbitrary, though in different degrees proportionate to the 
severity of despotism. For the same reason, during the violence of 
political convulsions, there is always a sensible contraction of capital, 
a stagnation of industry, a disappearance of profit, and a general de- 
pression while the alarm continues: and, on the contrary, an instan- 
taneous energy and activity highly favourable to public prosperity, 
upon the re-establishment of confidence. The saints and madonnas 
of superstitious nations, the splendid pageantry and richly decorated 
idols of Asiatic worship, gave life to no agricultural or manufacturing 
enterprise. The riches of the fane and the time lost in adoration 
would really purchase the blessings that barren prayers can never 
extort from the object of idolatry. There is a great deal of inert 
capital in countries, where the national habits lead to the extended 



CHAP. XIII. ON PRODUCTION. 123 

use of the precious metals in furniture, clothes, and decorations. 
The silly admiration bestowed by the lower orders on the display 
of such idle and unproductive finery, is hostile to their own interests. 
For the opulent individual, who vests 20,000 dollars, in gilding, 
plate, and the splendour of his establishment, has it not to lay out at 
interest, and withdraws it from the support of industry of any kind. 
The nation loses the annual revenue of so much capital, and the 
annual profit of the industry it might have kept in activity. 

Hitherto we have been considering that kind of value only, which 
is capable, after its creation, of being, as it were, incorporated with 
matter, and preserved for a longer or shorter period. But all the 
values producible by human industry, have not this quality. Some 
there are, which must have reality, because they are in high estima- 
tion, and purchased by the exchange of costly and durable products, 
which nevertheless have themselves no durability, but perish the 
moment of their production. This class of values I shall define in 
the ensuing chapter, and denominate immaterial products.* 



CHAPTER XHI. 

OP IMMATERIAL PRODUCTS, OR VALUES CONSUMED AT THE MOMENT 
OF PRODUCTION. 

A PHYSICIAN goes to visit a sick person, observes the symptoms 
of disease, prescribes a remedy, and takes his leave without deposit- 
ing any product, that the invalid or his family can transfer to a third 
person, or even keep for the consumption of a future day. 

Has the industry of the physician been unproductive? Who can 
for a moment suppose so? The patient's life has been saved perhaps. 
Was this product incapable of becoming an object of barter? By 
no means; the physician's ad,vice has been exchanged for his fee; 
but the want of this advice ceased the moment it was given. The 
act of giving was its production, of hearing its consumption, and 
the consumption and production were simultaneous. 

This is what I call an immaterial product. 

The industry of a musician or an actor yields a product of the 
same kind: it gives one an amusement, a pleasure one can not pos- 
sibly retain or preserve for future consumption, or as the object of 
barter for other enjoyments. This pleasure has its price, it is true: 

* It was my first intention to call these perishable products, but this tenn 
would be equally applicable to products of a material kind. Intransferable 
would be equally incorrect, for this class of products does pass from the pro- 
ducer to the consumer. The word transient, does not exclude all idea of dura- 
tion whatever, neither does the word momentary. 



124 ON PRODUCTION. book i. 

but it has no further existence, except perhaps in the memory, and 
no exchangeable value, after the instant of its production. 

Smith will not allow the name of products to the results of these 
branches of industry. Labour so bestowed he calls unproductive; 
an error he was led into by his definition of wealth, which he defines 
to consist of things bearing a value capable of being preserved, 
instead of extending the name to all things bearing exchangeable 
value: consequently, excluding products consumed as soon as created. 
The industry of the physician, however, as well as that of the public 
functionary, the advocate or the judge, which are all of them of the 
same class, satisfies wants of so essential a nature, that without those 
professions no society could exist. Are not, then, the fruits of their 
labour real? They are so far so, as to be purchased at ihe price of 
other and material products, which Smith allows to be wealth; and 
by the repetition of this kind of barter, the producers of immaterial 
products acquire fortunes.* 

To descend to items of pure amusement, it cannot be denied, that 
the representation of a good comedy gives as solid a pleasure as a 
box of comfits, or a discharge of fire-works, which are products, 
even within Smith's definition. Nor can I discover any sound rea- 
son, why the talent of the painter should be deemed productive, 
and not the talent of the musician. t 

Smith himself has exposed the error of the economist in confining 
the term, wealth, to the mere value of the raw material contained 
in each product; he advanced a great step in political economy, by 
demonstrating wealth to consist of the raw material, plus, the value 
added to it by industry; but, having gone so far as to promote to 
the rank of wealth an abstract commodity, value, why reckon it as 
nothing, however real and exchangeable, when not incorporated in 
matter? This is the more surprising, because he went so far as to 
treat of labour, abstracted from the matter wherein it is employed; 
to examine the causes which operate upon and influence its value; 
and even to propose that value as the safest and least variable mea- 
sure of all other values.:}: 

The nature of immaterial products makes it impossible ever to 
accumulate them, so as to render them a part of the national capital. 
A people containing a host of musicians, priests, and public func- 
tionaries might be abundantly amused, well versed in religious 
doctrines, and admirably governed; but that is all. Its capital 
would receive no direct accession from the total labour of all these 
individuals, though industrious enough in their respective vocations, 
because their products would be consumed as fast as produced. 

* Wherefore de Verri is wrong in asserting-, that the occupations of the sove- 
reign, the magistrate, the soldier, and the priest, do not fall within the cognizance 
of political economy. {Meditazioni sullu Economia PolUica, § 24.) 

t This error has already been pointed out by M. Germain Gamier, in the notes 
to his French translation of Smith. 

X Some writers, who have probably taken but a cursory view of the positions 
here laid down, still persist in setting down the producers of immaterial products 



CHAP. XIII. ON PRODUCTION. 125 

Consequently, nothing is gained on the score of puhlic prosperity, 
by ingeniously creating an unnatural demand for the labour of any 
of these professions : tlie labour diverted into that channel of produc- 
tion can not be increased, without increasing the consumption also. 
If this consumption yield a gratification, Ihen indeed we may console 
ourselves for the sacrifice ; but when that consumption is itself an 
evil, it must be confessed the system which causes it is deplorable 
enough. 

This occurs in practice, whenever legislation is too complicated. 
The study of the law, becoming more intricate and tedious, occupies 
more persons, whose labour must likewise be better paid. What does 
society gain by this ? Are the respective rights of its members bet- 
ter protected ? Undoubtedly not : the intricacy of law, on the con- 
trary, holds out a great encouragement to fraud, by multiplying the 
chances of evasion, and very rarely adds to the solidity of title or of 
right. The only advantage is, the greater frequency and duration of 
suits. The same reasoning applies to superfluous offices in the pub- 
lic administration. To create an office for the administration of what 
ought to be left to itself, is to do an injury to the subject in the 
first instance, and make him pay for it afterwards as if it were a 
benefit* 

Wherefore it is impossible to admit the inference oft M. Garnier, 
that because the labour of physicians, lawyers, and the like is pro- 
ductive, therefore a nation gains as much by the multiplication of that 
class of labour as of any other. This would be the same as bestow- 
ing upon a material product more manual labour than is necessary 
for its completion. The labour productive of immaterial products, 
like every other labour, is productive so far onh^ as it augments the 
utility, and thereby the value of a product : beyond this point it is a 
purely unproductive exertion. To render the laws intricate pur- 
posely to give lawyers full business in expounding them, would be 
equally absurd, as to spread a disease that doctors may find practice. 

Immaterial products are the fruit of human industry, in which 
term we have comprised every kind of productive labour. It is not 
so easy to understand how they can at the same time be the fruit of 
capital. Yet these products are for the most part the result of some 
talent or other, which always implies previous study ; and no study 
can take place without advances of capital. 

Before the advice of the physician can be given or taken, the phy- 

amongst the unproductive labourers. But it is vain to strugfjle against the 
nature of things. Those at all conversant with the science of political economy, 
are compelled to yield involuntary homage to its principles. Thus Sisniondi, 
after having spoken of the values expended in the wages of unproductive 
labourers, goes on to say, " Ce sont des Co7isummations rapides qui suivcni immc- 
diatement la production.^'' JVouv. Frinc. torn. ii. p. 203, admitting a production 
by those he had pronounced to be unproductive ! 

* "What, then, are we to think of those who assert in substance, if not in 
words, that such a formality or such a tax is productive of one benefit at least, 
namely, the maintenance of such or such an establishment of clerks and officers'? 

f Traduction de Smith, note 20. 



126 ON PRODUCTION. book i. 

sician or his relations must first have defrayed the charges of an edu- 
cation of many years' duration : he must have subsisted while a stu- 
dent ; professors must have been paid ; books purchased ; journeys 
perhaps have been performed ; all which implies the disbursement 
of a capital previously accumulated.* So likewise the lawyer's opin- 
ion, the musician's song, &c. are products, that can never be raised 
without the concurrence of industry and capital. Even the ability 
of the public functionary is an accumulated capital. It requires the 
same kind of outlay, for the education of a civil or military engineer, 
as for that of a physician. Indeed we may take it for granted, that 
the funds expended in the training of a young man for the public 
service, are found by experience to be a fair investment of capital, 
and that labour of this description is well paid ; for we find more 
applicants than offices in almost every branch of administration, even 
in countries where offices are unnecessarily multiplied. 

The industry productive of immaterial products will be found to 
go through exactly the same process, as, in the analysis made in the 
beginning of this work, we have shown to be followed by industry 
in general. This may be illustrated by an example. Before an 
ordinary song can be executed, the arts of the composer and the 
practical musician must have been regular and distinct callings ; and 
the best mode of acquiring skill in them must have been discovered; 
this is the department of the man of science, or theorist. The appli- 
cation of this mode and of this art, has been left to the composer and 
singer, who have calculated, the one in composing his tune, the other 
in the execution of it, that it would afford a pleasure, to which the 
audience would attach some value or other. Finally, the execution 
is the concluding operation of industry. 

There are, however, some immaterial products, with respect to 
which the two first operations are so extremely trifling, that one may 
almost account them as nothing. Of this description is the service 
of a menial domestic. The art of service is little or nothing, and 
the application of that art is made by the employer ; so that nothing 
is left to the servant, but the executive business of service, which is 
the last and lowest of industrious operations. 

It necessarily follows, that, in this class of industry, and some few 
others practised by the lowest ranks of society, that of the porter for 
instance, or of the prostitute, &c. &c. : the charge of training being 
little or nothing, the products may be looked upon not only as the 
fruits of very coarse and primitive industry, but likewise as products, 
to the creation of which capital has contributed nothing ; for 1 can 
not think the expense of these agents' subsistence from infancy, till 
the age of emancipation from parental care, can be considered as a 

* I will not here anticipate the investigation of the profits of industry and ca- 
pital, but confine myself to observe, tn passant, that capital is thrown away upon 
the physician, and his fees improperly limited, unless, besides the recompense of 
his actual labour and talent, (which latter is a natural agent gratuitously given 
to him), they defray the interest of the capital expended in his education, and 
not the common rate of interest, but calculated at the rate of an annuity. 



CHAP. XIII. OxN PRODUCTION. 127 

capital, the interest of which is paid by the subsequent profits. I 
shall give my reasons for this opinion when I come to speak of 
wages.* 

The pleasures one enjoys at the price of any kind of personal exer- 
tion, are immaterial products, consumed at the instant of production 
by the very person that has created them. Of this description are 
the pleasures derived from arts studied solely for self-amusement. 
In learning music, a man devotes to that study some small capital, 
some time and personal labour ; all which together are the price 
paid for the pleasure of singing a new air or taking part in a concert. 

Gaming, dancing, and field-sports, are labours of the same kind. 
The amusement derived from them is instantly consumed by the 
persons who have performed them. When a man executes a paint- 
ing, or makes any article of smith's or joiner's work for his amuse- 
ment, he at the same time creates a durable product or value, and an 
immaterial product, viz. his personal amusement.t 

In speaking of capital, we have seen, that part of it is devoted to 
the production of material products, and part remains wholly unpro- 
ductive. There is also a further part productive of utility or plea- 
sure, which, can, therefore, be reckoned as a portion neither of the 
capital engaged in the production of material objects, nor of that ab- 
solutely inactive. Under this head may be comprised dwelling- 
houses, furniture, and decorations, that are an addition to the mere 
pleasures of life. The utility they afibrd is an immaterial product. 

When a young couple sets up house-keeping for the first time, the 
plate they provide themselves with cannot be considered as abso- 
lutely inactive capital, for it is in constant domestic use ; nor can it 
be reckoned as capital engaged in the raising of material products ; 
for it leads to the production of no one object capable of being re- 
served for future consumption; neither is it an object of ^annual con- 
sumption, for it may last, perhaps, for their joint lives, and be handed 
down to their children ; but it is capital productive of utility and 
pleasure. Indeed, it is so much value accumulated or in other words 
withdrawn from reproductive consumption ; consequently, yielding 
neither profit nor interest, but productive of some degree of benefit 
or utility, which is gradually consumed and incapable of being real- 
ised, yet it is possessed of real and positive value, since it is ccasion- 

* The wagres of the mere labourer are limited to the bare necessaries of life, 
without which his agency can not be continued and renewed ; there is no surplus 
for the interest on capital. But the subsistence of his children, until old enough 
to earn their livelihood, is comprised in the necessaries of the labourer. 

f An indolent and inert people is always little addicted to amusenients result- 
ing from the exercise of personal faculties. Labour is attended with so much 
pain to them, as very few pleasures are intense enough to repay. The Turks 
think us mad to find pleasure in the violent motions of the dance ; without re- 
flecting, that it causes to us infinitely less fatigue than to themselves. They pre- 
fer pleasures prepared by the fatigue of others. There is, perhaps, as much in- 
dustry expended on pleasure in Turkey as with us ; but it is exerted in general 
by slaves, who do not participate in the product. 



128 ON PRODUCTION. book i. 

ally the object of purchase : as in the instance of the rent of a house 
or the hire of furniture, and the like. 

Although it be a sad mistake of personal interest to vest the small- 
est particle of capital in a manner wholly unproductive, it is by no 
means so to lay out, in a way productive of utility or amusement, so 
much as may be not disproportionate to the circumstances of the in- 
dividual. There is a regular gradation of the ratio of capital so vested 
by individuals respectively, from the rude furniture of the poor 
man's hovel, up to the costly ornaments and dazzling jewels of the 
wealthy. When a nation is rich, the poorest family in it possesses a 
capital of this kind, not indeed of any great amount, but still enough 
to satisfy moderate and limited desires. The prevalence of general 
wealth in a community is more strongly indicated by meeting uni- 
versally with some useful and agreeable household conveniences in 
the dwellings of the inferior ranks, than by the splendid palaces and 
costly magnificence of a few favourites of fortune, or by the casual 
display of diamonds and finery we sometimes see brought together 
in a large city, where the whole wealth of the place is often exhibited 
at one view, at a fete or a theatre of public resort; but which, after all, 
are a mere trifle, compared with the aggregate value of the house- 
hold articles of a great people. 

The component items of a capital producing bare utility or amuse- 
ment, are liable to wear and tear, though in a very slight degree; 
and if that wear and tear be not made good out of the savings of 
annual revenue, there is a gradual dissipation and reduction of capital. 
This remark may appear trifling; yet how many people think they 
are living upon their revenue, when they are at the same time par- 
tially consuming their capital! Suppose, for instance, a man is the 
proprietor of the house he lives in; if the house be calculated to last 
100 years, and have cost 20,000 dollars in the building, it costs the 
proprietor or his heirs 200 dollars per annum, exclusive of the inte- 
rest upon the original cost, otherwise the whole capital will be extin- 
guished, or nearly so, by the end of 100 years. The same reasoning 
is applicable to every other item of capital devoted to the production 
of utility or pleasure; to a sideboard, a jewel, every imaginable 
object, in short, that comes under the same denomination. 

And, vice versa, when annual revenue, arising from whatever 
source, is encroached upon for the purpose of enlarging the capital 
devoted to the production of useful or agreeable objects, there is an 
actual increase of capital and of fortune, though none of revenue. 

Capital of this class, like all other capital, without exception, is 
formed by the partial accumulations of annual pra^ucts. There is 
no other way of acquiring capital, but by personal accumulation, or 
by succession to accumulation of others. Wherefore, the reason is 
referred on this head to Chap. XI, where I have treated of the accu- 
mulation of capital. 

A public edifice, a bridge, a highway, are savings or accumulations 
of revenue, devoted to the formation of a capital, whose returns are 
an immaterial product consumed by the public at large. If the con- 



CHAP. XIII. ON PRODUCTION. 129 

struction of the bridge or highway, added to the purchase of the 
ground it stands upon, have cost 200,000 dollars, the use the public 
makes of it may be estimatei to cost 10,000 dollars per annum.* 

There are some immaterial products, towards which the land is a 
principal contributor. Such is the pleasure derived from a park or 
pleasure-garden. The pleasure is afforded by the continual and daily 
agency of the natural object, and is consumed as fast as produced. A 
ground yielding pleasure must, therefore, not be confounded with 
ground lying waste or in fallow. Wherein again appears the anal- 
ogy of land to capital, of which, as we have seen, some part is pro- 
ductive of immaterial products, and some part is altogether inactive. 

Gardens and pleasure-grounds have generally cost some expense 
in embellishment; in which case, capital and land unite their agency 
to yield an immaterial product. 

Some pleasure-grounds yield likewise timber and pasturage: these 
are productive of both classes of products. The old-fashioned gar- 
dens in France yielded no material product; those of modern times 
are somewhat improved in this particular, and would be more so, if 
culinary herbs and fruit-trees were oftener introduced. Doubtless, it 
would be harsh to find fault with a proprietor in easy circumstances, for 
appropriating part of his freehold to the mere purpose of amusement. 
The delightful moments he there passes with his family around him, 
the wholesome exercise he takes, the spirits he inhales, are among the 
most valuable and substantial blessings of life. By all means then 
let him lay out his ground as he likes, and give full scope to his 
taste, or even caprice; but if caprice can be directed to an useful end, 
if he can derive profit without abridging enjoyment, his garden will 
have additional merit, and present a two-fold source of delight to the 
eye of the statesman and the philosopher. 

I have seen some few gardens possessed of this double faculty of 
production; whence, although the lime, horse-chesnut and sycamore 
trees, and others of the ornamental kind, were by no means ex- 
cluded, any more than the lawns and parterres; yet at the same time 
the fruit-trees, decked in the bloom of vernal promise, or weighed 
down by the maturity of autumnal wealth, added a variety and rich- 
ness of colouring to the other local beauties. The advantages of dis- 
tance and position were attended to without violating the conve- 
nience of division and inclosure. The beds and borders, planted 
with vegetables, were not provokingly straight, regular, or uniform, 

* If it entail a further charge of 300 dollars for annual repairs and mainte- 
nance, the public consumption of pleasure or utility may be set down at 10,200 
dollars per annum. This is the only way of taking the account, with a view to 
compare the advantage derived by the payers of public taxes, with the sacrifices 
imposed on them for the acquisition of such conveniences. In the case put 
above, the public will be a gainer, if the outlay of 10,200 dollars have effected 
an annual saving in the charge of national production, or, what is the same 
thing, an annual increase of the national product, of still larger amount. In the 
contrary supposition, the national administration will have led the nation into a 
losing concern. 

17 



130 ON PRODUCTION. book i. 

but harmonized with the undulations of the surface, and of vegetation 
of larger growth; and the walks' were so disposed as to serve both 
for pleasure and cultivation. Every Ihfhg was arranged with a view 
to ornament, even to the vine-trelliced well for filling the watering 
pots. The whole, in short, was so ordered, as if designed to impress 
the conviction, that utility and beauty are by no means incompati- 
ble, and that pleasure may grow up by the side of wealth. 

A whole country may, in like manner, grow rich even upon its 
ornamental possessions. Were trees planted wherever they could 
thrive without injury to other products,* besides the accession of 
beauty and salubrity, and the additional moisture attracted by the 
multiplication of timber trees, the value of the timber alone" would, 
in a country of much extent, amount to something considerable. 

There is this advantage, in the cultivation of timber-trees, that they 
require no human industry beyond the first planting, after which 
nature is the sole agent of their production. But it is not enough 
merely to plant, we must check the desire of cutting down, until the 
weak and slender stalk, gradually imbibing the juices of the earth and 
atmosphere, shall, without the hand of cultivation, have acquired 
bulk and solidity, and spread its lofty foliage to the heavenst. The 
best that man can do for it is, to forget it for some years; and even 
where it yields no annual product, it will recompense his forbearance 
when arrived at maturity, by an ample supply of firing, and of tim- 
ber for the carpenter, the joiner, and the wheel-wright. 

In all ages, the love of trees and their cultivation has been strongly 
recommended by the best writers. The historian of Cyrus records, 
among his chief titles to renown, the merit of having planted all 
Asia Minor. In the United States, upon the birth of a daughter, the 
cultivator plants a little wood, to grow up with her, and to be her 
portion on the day of marriage.(l) Sully, whose views of policy 
were extremely enlightened, enriched most of the provinces of 
France with the plantation he directed. 1 have seen several, to 
which public gratitude still affixes his name; and they remind me of 
the saying of Addison, who was wont to exclaim, whenever he saw 
a plantation, " A useful man has passed this way." 

* In many countries, an exaggerated notion seems to prevail, of the damage 
done by timber-trees, to other products of the soil ; yet it should seem, that they 
rather enhance than diminish the revenue of the landholder ; for we find those 
countries most productive, that are the best clothed with timber : witness Nor- 
mandy, England, Belgium and Lombardy. 

I The leaves of trees absorb the carbonic-acid gas floating in the atmosphere 
we breathe, and which is so injurious to respiration. When this gas is super- 
abundant, it brings on asphyxia, and occasions death. On the contrary, vegeta- 
tion increases the proportion of oxygen, which is the gas most favouraljle to re- 
spiration and to health. Ceteris paribus, those towns are the healthiest, which 
have the most open spaces covered with trees. It would be well to plant all 
our spacious quays. 

(1) The American cultivator might be said, with much greater semblance of 
truth, on the birth of a daughter, to cut down " a little wood," instead of plant- 
ing one. American Editor. 



CHAP. XIV. ON PRODUCTION. 131 

As yet we have been taken up with the consideration of the agents 
essential to production; without whose agency mankind would have 
no other subsistence or enjoyment, than the scanty and limited sup- 
ply that nature affords spontaneously. We first investigated the 
mode in which these agents, each in its respective department, and 
all in concert, co-operate in the work of production and have after- 
wards examined in detail the individual action of each, for the fur- 
ther elucidation of the subject. We must now proceed to examine 
the intrinsic and accidental causes, which act upon production, and 
clog or facilitate the exertion of productive agents. 



CHAPTER XIV. 

OF THE RIGHT OP PROPERTY. 

It is the province of speculative philosophy to trace the origin of 
the right of property; of legislation to regulate its transfer; and of 
political science to devise the surest means of protecting that right. 
Political economy recognises the right of property solely as the most 
powerful of all encouragements to the multiplication of wealth, and 
is satisfied with its actual stability, without inquiring about its origin 
or its safeguards. In fact, the legal inviolability of property is obvi- 
ously a mere mockery, where the sovereign power is unable to make 
the laws respected, where it either practises robbery itself,* or is 
impotent to repress it in others; or where possession is rendered 
perpetually insecure, by the intricacy of legislative enactments, and 
the subtleties of technical nicety. Nor can property be said to exist, 
where it is not matter of reality as well as of right. Then, and then 
only, can the sources of production, namely, land, capital, and indus- 
try, attain their utmost degree of fecundity.(l) 

* The strength of an individual is so little, when opposed to that of the go- 
vernment he lives under, that the subject can have no security against the exac- 
tions and abuses of authority, except in those countries where the guardianship 
of the laws is entrusted to the all-searching vigilance of a free press, and their 
violation checked by an efficient national representation. 

(1) Although, according to our author, it is the province of speculative philos- 
ophy to trace the origin of property, the existence of which, in all politico-econo- 
mical inquiries, is assumed as the foundation of national wealth, it may not here be 
improper to introduce a few observations on the Right of Property, illustrating 
its historical origin, and pointing out its true character. Most writers on natu- 
ral law, among whom may be named Grotius, Puffiendorff, Barbcyrac, and Locke, 
ascribe, in general, the origin of property to priority of occupancy, and have much 
perplexed themselves in attempting to prove how this act should give an exclu- 
sive right of individual enjoyment to what was previously held in common. 
Blackstone, although he does not enter into the dispute about the manner, as has 



132 ON PRODUCTION. booki. 

There are some truths so completely self-evident, that demonstra- 
tion is quite superfluous. This is one of that number. For who 
will attempt to deny, that the certainty of enjoying the fruits of one's 

been remarked, in which occupancy conveys a right of property, expresses no 
doubt about its having this efifect, independent of positive institutions. 

Later writers on jurisprudence have adopted other theories on the subject of pro- 
perty, which being altogether unsatisfactory, we will not notice, except to remark 
that the most refined and ingenious speculations, although equally inconclusive, 
respecting the nature and origin of property, are those of Lord Kames, in the 
Essay on Property, in his Historical Law Tracts. 

DuGALD Stewart, however, is the first inquirer who has taught us to think 
and reason with accuracy on this subject, and it is to his observations on the 
Right of Property, contained in the supplement to the chapter, " Of Justice," in 
his work on the " Philosophy of the Active and Moral Powers of Man," that we 
must refer the reader who is desirous of possessing just and unanswerable argu- 
ments for the true foundations on which property rests. We must here content our- 
selves with extracting a few passages, which will exhibit this illustrious philo- 
sopher's views of the origin of the acquisition of property, which he traces to two 
distinct sources. 

" It is necessary," says Stewart, " to distinguish carefully the complete right 
of property, which is founded on labour, from the transient right of possession 
which is acquired by mere priority of occupancy ; thus, before the appropriation 
of land, if any individual had occupied a particular spot, for repose or shade, it 
would have been unjust to deprive him of possession of it. This, however, was 
only a transient right. The spot of ground would again become common the 
moment the occupier had left it; that is, the right of possession would remain no 
longer than the act of possession. Cicero illustrates this happily by the simili- 
tude of a theatre. ' Quemadmodum theatrum, cum commune sit, recte tamen dici 
potest ejus esse cum locum quem quisque occuparit.' The general conclusions 
which I deduce are these : — 1. That in every state of society labour, wherever it 
is exerted, is understood to found a right of property. 2. That, according to na- 
tural law, labour is the only original way of acquiring property. 3. That, ac- 
cording to natural law, mere occupancy founds only a right of possession ; and 
that, whenever it founds a complete right of property, it owes its force to positive 
institutions." 

After premising these leading propositions, he proceeds with what he terms a 
slight historical sketch of the ditferent systems respecting the origin of property, 
from which we have only room to copy the following passage, which, however, 
contains this eminent author's views of the right of property, as recognised hy the 
law of nature ; and the right of property, as created by the municipal regulations, 
and demonstrating the futility of the attempts hitherto made to resolve all the 
different phenomena into one general principle. 

'' In such a state of things as that with which we are connected, the right of 
property must be understood to derive its origin from two distinct sources; the 
one is, that natural sentiment of the mind which establishes a moral connexion 
between labour and an exclusive enjoyment of the fruits of it; the other is the 
municipal institutions of the country where we live. These institutions every 
where take rise partly from ideas of natural justice and partly (perhaps chiefly) 
from ideas of supposed utility, — two principles which, when properly under- 
stood, are, I believe, always in harmony with each other, and which it ought to 
be the greataim of every legislator to reconcile to the utmostof his power. Among 
those questions, however, which fall under the cognizance of positive laws, there 
are many on which natiiral justice is entirely silent, and which, of consequence, 
may be discussed on principles oi utility solely. Such are most of the questions 
concerning the regulation of the succession to a man's property after his death ; 
of some of which it perhaps may be found that the determination ought to vary 
with the circumstances of the society, and which have certainly, in fact, been 
frequently determined by the caprice of the legislator, or by some principle ulti- 



CHAP. XIV. ON PRODUCTION. ]33 

land, capital and labour, is the most powerful inducement to render 
them productive? Or who is dull enough to doubt, that no one 
knows so well as the proprietor how to make the best use of his 
property? Yet how often in practice is that inviolability of pro- 
perty disregarded, which, in theory, is allowed by all to be so 
immensely advantageous? How often is it broken in upon for the 
most insignificant purposes; and its violation, that should naturally 
excite indignation, justified upon the most flimsy pretexts ? So few 
persons are there who have a lively sense of any but a direct injury, 
or, with the most lively feelings, have firmness enough to act up to 
their sentiments. There is no security of property, where a despotic 
authority can possess itself of the property of the subject against his 
consent. Neither is there such security, where the consent is merely 
nominal and delusive. In England, the taxes are imposed by the 
national representation; if, then, the minister be in the possession of 
an absolute majority, whether by means of electioneering influence, 
or by the overwhelming patronage foolishly placed at his disposal, 
taxation would no longer be in reality imposed by the national repre- 
sentatives; the body bearing that name would, in efiect, be the repre- 
sentatives of the minister; and the people of England would be 
forcibly subjected to the severest privations, to further projects that 
possibly might be every way injurious to them*. 

It is to be observed that the right of property is equally invadfed, 
by obstructing the free employment of the means of production, as 
by violently depriving the proprietor of the product of his land, 
capital, or industry; for the right of property, as defined by jurists, 
is the right of use or even abuse. Thus, landed property is violated 
by arbitrarily prescribing tillage or plantation ; or by interdicting par- 
ticular modes of cultivation; the property of the capitalist is violated, 
by prohibiting particular ways of employing it; for instance, by 
interdicting large purchases of corn, directing all bullion to be car- 
ried to the mint, forbidding the proprietor to build on his own soil, 
or prescribing the form and requisites of the building. It is a fur- 
ther violation of the capitalist's property to prohibit any kind of 
industry, or to load it with duties amounting to prohibition, after he 
has once embarked his capital in that way. It is manifest, that a 
prohibition upon sugar would annihilate most of the capital of the 
sugar refiners, vested in furnaces, utensils, &c. &c.t 

The property a man has in his own industry, is violated, whenever 

mately resolvable into an accidental association of ideas. Indeed, various cases 
may be supposed in which it is not only useful, but necessary, that a rule should 
be fixed ; while, at the same time, neither justice nor utility seem to be much 
interested in the particular decision." 

American Editor. 

* Adam Smith has asserted, that the security afforded to property by the laws 
of England has more than counteracted the repeated faults and blunders of its 
government. It may be doubted, whether he would now adhere to that opinion. 

f It would bn vain to say to him, why not employ your works in some other 
way 1 Probably, neither the spot nor the works of a refinery could be otherwise 
employed without enormous loss. 



134 ON PRODUCTION. book i. 

he is forbidden the free exercise of his faculties and talents, except 
insomuch as they would interfere with the rights of third parties.* A 
similar violation is committed when a man's labour is put in requi- 
sition for one purpose, though designed by himself for another; as 
when an artisan or trader is forced into the military life, whether 
permanently or merely for the occasion. 

I am well aware, that the importance of maintaining social order, 
whereon the security of property depends, takes precedence of pro- 
i perty itself; for which very reason, nothing short of the necessity of 
' defending that order from manifest danger can authorise these or 
similar violations of individual right. And this it is which impresses 
upon the proprietors the necessity of requiring, in the constitution of 
the body politic, some guarantee or other, that the public service 
shall never be made a mask to the passions and ambition of those in 
power. 

Thus taxation, when not intended as an engine of national depres- 
sion and miser}'", must be proved indispensable to the existence of 
social order; every step it takes beyond these limits, is an actual 
spoliation; for taxation, even where levied by national consent, is a 
violation of property; since no values can be levied, but upon the 
produce of the land, capital, and industry of individuals. 

But there are some extremely rare cases, where interference 
between the owner and his property is even beneficial to production 
itself. For example, in all countries that admit the detestable right 
of slavery, a right standing in hostility to all others, it is found expe- 
dient to limit the master's power over his slave, (a) Thus also, if a 

* The industrious faculties are, of all kinds of property, the least questiona- 
ble ; being derived directly either from nature, or from personal assiduity. The 
property in them is of higher pretensions than that of the land, which may gen- 
erally be traced up to an act of spoliation; for it is hardly possible to show an 
instance, in which its ownership has been legitimately transmitted from the first 
occupancy. It ranks higher than the right of the capitalist also; for even taking 
it for granted, that this latter has been acquired without any spoliation whatever, 
and by the gradual accumulations of ages, yet the succession to it could not have 
been established without the aid of legislation, which aid may have been grant- 
ed on conditions. Yet, sacred as the. property in the faculties of industry is, it 
is constantly infringed upon, not only in the flagrant abuse of personal slavery, 
but in many other points of more frequent occurrence. 

A government is guilty of an invasion upon it, when it appropriates to itself a 
particular branch of industry, the business of exchange and brokerage for exam- 
ple; or when it sells the exclusive privilege of conducting it. It is still a greater 
violation to authorize a gendarme, commissary of police, or judge, to arrest and 
detain individuals at discretion, on the plea of public safety or security to the 
constituted authorities ; thus depriving the individual of the fair and reasonable 
certainty of having his time and faculties at his own disposal, and of being able 
to complete what he may begin upon. What robber or despoiler could commit 
a more atrocious act of invasion upon the public security, certain as he is of being 
speedily put down, and counteracted by private as well as public opposition] 



(a) This is merely an instance of the necessity of counteracting one poison by 
another. T. 



CHAP. XIV. ON PRODUCTION. 135 

society stand in urgent need of timber for the shipwright or carpen- 
ter, it must reconcile itself to some regulations respecting the felling 
of private woods;* or the fear of losing the veins of mineral that 
intersect the soil, may sometimes oblige a government to work the 
mines itself. It may be readily conceived, that, even if there were 
no restraints upon mining, want of skill, the impatience of avarice, 
or the insufficiency of capital, might induce a proprietor to exhaust 
the superficial, which are commonly the poorest loads, and occasion 
the loss of superior depth and qua]ity.(l) Sometimes a vein of 
mineral passes through the ground of many proprietors, but is acces- 
sible only in one spot. In this case, the obstinacy of a refractory 
proprietor must be disregarded, and the prosecution of the works be 
compulsory; though, after all, I will not undertake to affirrn, that it 
would not be more advisable on the whole to respect his rights, or 
that the possession of a few additional mines is not too dearly pur- 
chased by this infringement upon the inviolability of property. 

Lastly, public safety sometimes imperiously requires the sacrifice 
of public property; but that sacrifice is a violation, notwithstanding 
an indemnity given in such cases. For the right of property 
implies the free disposition of one's own; and its sacrifice, however 
fully indemnified, is a forced disposition. 

When public authority is not itself a spoliator, it procures to the 
nation the greatest of all blessings, protection from spoliation by 
others. Without this protection of each individual by the united 
force of the whole community, it is impossible to conceive any con- 
siderable development of the productive powers of man, of land, and 
of capital; or even to conceive the existence of capital at all; for it 
is nothing more than accumulated value, operating under the safe- 
guard of authority. This is the reason why no nation has ever 
arrived at any degree of opulence, that has not been subject to a 
regular government. Civilized nations are indebted to political 
organization for the innumerable and infinitely various productions, 
that satisfy their infinite wants, as well as for the fine arts and the 
opportunities of leisure that accumulation afibrds, without which the 

* Probably, also, were it not for maritime wars, originating, sometimes in 
puerile vanity, and sometimes in national errors of self-interest, commerce would 
be the best purveyor of timber for ship-building ; so that, in reality, the abuse of 
the interference of public authority, in respect to the growth of private timber, is 
only a consequence of a previous abuse of a more destructive and less excusable 
character. 



(1) [If no one knows so well as the proprietor, how to make the best use of 
his property, as our author has just remarked, what advantage can result to so- 
ciety from the interference, in any case, of public authority, with the rights of in- 
dividuals in the business of production. Nothing but the absolute maintenance 
of the social order should ever be permitted, for an instant, to violate the sacred 
right of private property. Quite as specious, though equally unsound reasons 
may be assigned for imposing restraints upon a variety of other employments 
besides mining.] American Editor. 



X36 ON PRODUCTION. book i. 

faculties of the mind could never be cultivated, or man by their 
means attain the full dignity, whereof his nature is susceptible. 
. The poor man, that can call nothing his own, is equally interested 
with the rich in upholding the inviolability of property. His per- 
sonal services would not be available, without the aid of accumula- 
tions previously made and protected. Every obstruction to, or dis- 
sipation of these accumulations, is a material injury to his means of 
gaining a livelihood; and the ruin and spoliation of the higher is as 
certainly followed by the misery and degradation of the lower classes. 
A confused notion of the advantages of this right of property has 
been equaly conducive with the personal interest of the wealthy, to 
make all civilized communities pursue and punish every invasion of 
property as a crime. The study of political economy is admirably 
calculated to justify and confirm this act of legislation; inasmuch as 
it explains why the happy effects, resulting from the right of pro- 
perty, are more striking in proportion as that right is well guarded 
by political institutions. 



CHAPTER XV. 

Of the demand or market for products. 

It is common to hear adventurers in the different channels of 
industry assert, that their difficulty lies not in the production, but in 
the disposal of commodities; that products would always be abun- 
dant, if there were but a ready demand, or market for them. When 
the demand for their commodities is slow, difficult, and productive 
of little advantage, they pronounce money to be scarce; the grand 
object of their desire is, a consumption brisk enough to quicken 
sales and keep up prices. But ask them what peculiar causes and 
circumstances facilitate the demand for their products, and you will 
soon perceive that most of them have extremely vague notions of 
these matters; that their observation of facts is imperfect, and their 
explanation still more so; that they treat doubtful points as matter 
of certainty, often pray for what is directly opposite to their inte- 
rests, and importunately solicit from authority a protection of the most 
mischievous tendency. 

To enable us to form clear and correct practical notions in regard 
to markets for the products of industry, we must carefully analyse 
the best established and most certain facts, and apply to them the in- 
ferences we have already deduced from a similar way of proceeding; 
and thus perhaps we may arrive at new and important truths, that 
may serve to enlighten the views of the agents of industry, and to 
give confidence to the measures of governments anxious to afford 
them encouragement. 



CHAP. XV. ON PRODUCTION. I37 

A man who applies his labour to the investing of objects with 
value by the creation of utility of some sort, can not expect that the 
value to be appreciated and paid for, unless where other men have 
the means of purchasing it. Now, of what do these means consist ? 
Of other values, of other products, likewise the fruits of industry, 
capital, and land. Which leads us to a conclusion, that may at first 
sight appear paradoxical, namely, that it is production which opens 
a demand for products. 

Should a tradesman say, « I do not want other products for my 
woollens, I want money," there could be little difficulty in convinc- 
ing him, that his customers could not pay him in money, without 
having first procured it by the sale of some other commodities of 
their^ own. « Yonder farmer," he may be told, will buy your 
woollens, if his crops be good, and will buy more or less according 
to their abundance or scantiness; he can buy none at all, if his crops 
fail altogether. Neither can you buy his wool nor his corn yourself, 
unless you contrive to get woollens or some other article to buy 
withal. You say, you only want money; I say, you want other 
commodities, and not money. For what, in point of fact, do you 
want the money? Is it not for the purchase of raw materials or 
stock for your trade, or victuals for your support?* Wherefore, it 
is products that you want, and not money. The silver coin you 
will have received on the sale of your own products, and given in 
the purchase of those of other people, will the next moment execute 
the same office between other contracting parties, and so from one to 
another to infinity; just as a public vehicle successively transports 
objects one after another. If you cannot find a ready sale for your 
commodity, will you say, it is merely for want of a vehicle to trans- 
port It? For, after all, money is but the agent of the transfer of 
values. Its whole utility has consisted in conveying to your hands 
the value of the commodities, which your customer has sold, for the 
purpose of buying again from you; and the very next purchase you 
make, it will again convey to a third person the value of the pro- 
ducts you may have sold to others. So that you will have bought, 
and every body must buy, the objects of want or desire, each with 
the value of his respective products transformed into money for the 
moment only. Otherwise, how could it be possible that there 
should now be bought and sold in France five or six times as many 
commodities, as in the miserable reign of Charles VI.? Is it not 
obvious, that five or six times as many commodities must have 
been produced, and that they must have served to purchase one or 
the other. 

Thus, to say that sales are dull, owing to the scarcity of money, 
IS to mistake the means for the cause; an error that proceeds fi;om 
the circumstances, that almost all produce is in the first instance 

* Even when money is obtained with a view to hoard or hury it, the ultimate 
object IS always to employ it in a purchase of some kind. The heir of the lucky 
finder uses it in that way, if the miser do not; for money, as money, has no other 
use than to buy with. 
18 



138 ON PRODUCTION. book i. 

exchanged for money, before it is ultimately converted into other 
produce: and the commodity, which recurs so repeatedly in use, 
appears to vulgar apprehensions the most important of commodities, 
and the end and object of all transactions, whereas it is only the 
medium. Sales can not be said to be dull because money is scarce, 
but because other products are so. There is always money enough 
to conduct the circulation and mutual interchange of other values, 
when those values really exist. Should the increase of traffic require 
more money to facilitate it, the want is easily supplied, and is a 
strong indication of prosperity — a proof that a great abundance of 
values has been created, which it is wished to exchange for other 
values. In such cases, merchants know well enough how to find 
substitutes for the product serving as the medium of exchange or 
money:* and money itself soon pours in, for this reason, that all 
produce naturally gravitates to that place where it is most in demand. 
It is a good sign when the business is too great for the money; just 
in the same way as it is a good sign when the goods are too plentiful 
for the warehouses. 

When a superabundant article can find no vent, the scarcity of 
money has so little to do with the obstruction of its sale, that the 
sellers would gladly receive its value in goods for their own con- 
sumption at the current price of the day: they would not ask for 
money, or have any occasion for that product, since the only use 
they could make of it would be to convert it forthwith into articles 
of their own consumption. t 

This observation is applicable to all cases, where there is a supply 
of commodities or of services in the market. They will universally 
find the most extensive demand in those places, where the most 
values are produced; because in no other places are the sole means 
of purchase created, that is, values. Money performs but a momen- 
tary function in this double exchange; and when the transaction is 
finally closed, it will always be found, that one kind of commodity 
has been exchanged for another. 

It is worth while to remark, that a product is no sooner created, 
than it, from that instant, affords a market for other products to the 
full extent of its own value. When the producer has put the finish- 
ing hand to his product, he is most anxious to sell it immediately, 
lest its value should diminish in his hands. Nor is he less anxious 
to dispose of the money he may get for it; for the value of money 
is also perishable. But the only way of getting rid of money is in 
the purchase of some product or other. Thus, the mere circum- 

* By bills at sight, or after date, bank-notes, running-credits, write-offs, &c. 
as at London and Amsterdam. 

t <I speak here of their aggregate consumption, whether unproductive and de- 
signed to satisfy the personal wants of themselves and their families, or expended 
in the sustenance of reproductive industry. The woollen or cotton manufacturer 
operates a two-fold consumption of wool and cotton. 1. For his personal wear. 
2. For the supply of his manufacture; but, be the purpose of his consumption 
what it may, whether personal gratification or reproduction, he must needs buy 
what he consumes with what he produces. 



CHAP. XV. ON PRODUCTION. 139 

stance of the creation of one product immediately opens a vent for 
other products. 

For this reason, a good harvest is favourable, not only to the 
agriculturist, but likewise to the dealers in all commodities generally. 
The greater the crop, the larger are the purchases of the growers. 
A bad harvest, on the contrary, hurts the sale of commodities at 
large. And so it is also with the products of manufacture and com- 
merce. The success of one branch of commerce supplies more 
ample means of purchase, and consequently opens a market for the 
products of all the other branches; on the other hand, the stagnation 
of one channel of manufacture, or of commerce, is felt in all the 
rest. 

But it may be asked, if this be so, how does it happen, that there 
is at times so great a glut of commodities in the market, and so much 
difficulty in finding a vent for them? Why cannot one of these super- 
abundant commodities be exchanged for another? I answer that the 
glut of a particular commodity arises from its having outrun the total 
demand for it in one of two ways; either because it has been pro 
duced in excessive abundance, or because the production of other 
commodities has fallen short. 

It is because the production of some commodities has declined, 
that other commodities are superabundant. To use a more hackneyed 
phrase, people have bought less, because they have made less profit;* 
and they have made less profit for one of two causes; either they have 
found difficulties in the employment of their productive means, or 
these means have themselves been deficient. 

It is observable, moreover, that precisely at the same lime that one 
commodity makes a loss, another commodity is making excessive 
profitt And, since such profits must operate as a powerful stimulus 
to the cultivation of that particular kind of products, there must 
needs be some violent means, or some extraordinary cause, a politi- 
cal or natural convulsion, or the avarice or ignorance of authority, to 
perpetuate this scarcity on the one hand, and consequent glut on tiie 
other. No sooner is the cause of this political disease removed, than 
the means of production feel a natural impulse towards the vacant 
channels, the replenishment of which restores activity to all the 
others. One kind of production would seldom outstrip every other, 
and its products be disproportionately cheapened, were production 
left entirely free. J 

* Individual profits must, in every description of production, from the general 
merchant to the common artisan, be derived from the participation in the values 
produced. The ratio of that participation will form the subject of Book II., infra. 

I The reader may easily apply these maxims to any time or country he is ac- 
quainted with. We have had a striliing instance in France, during the years 
1811, 1812, and 1813; when the high prices of colonial produce of wheat, and 
other articles, went hand in hand with the low price of many others that could 
find no advantageous market. 

X These considerations have hitherto been almost wholly overlooked, though 
forming the basis of correct conclusions in matters of commerce, and of its regu- 
lation by the national authority. The right course where it has, by good luck, 



140 ON PRODUCTION. book i. 

Sould a producer imagine, that many other classes, yielding no 
material products, are his customers and consumers equally with the 
classes that raise themselves a product of their own; as, for example, 
public functionaries, physicians, lawyers, churchmen, &c., and thence 
infer, that there is a class of demand other than that of the actual 
producers, he would but expose the shallowness and superficiality of 
his ideas. A priest goes to a shop to buy a gown or a surplice; he 
takes the value, that is to make the purchase in the form of money. 
Whence had he that money? From some tax-gatherer who has 
taken it from a tax-payer. But whence did this latter derive it? 
From the value he has himself produced. This value, first produced 
by the tax-payer, and afterwards turned into money, and given to 
the priest for his salary, has enabled him to make the purchase. 
The priest stands in the place of the producer, who might himself 

been pursued, appears to have been selected by accident, or, at most, by a con- 
fused idea of its propriety, without either self-conviction, or the ability to con- 
vince other people. 

Sismondi, who seems not to have very well understood the principles laid down 
in this and the three first chapters of Book II. of this work, instances the im- 
mense quantity of manufactured products with which England has of late inun- 
dated the markets of other nations, as a proof, that it isjaapossible for industry 
to be too productive. (^Nouv. Prin. liv. iv. c. 4.) But the glut thus occasioned 
proves nothing more than the feebleness of production in those countries that 
have been thus glutted with English manufactures. Did Brazil produce where- 
withal to purchase the English goods exported thither, those goods would not 
glut her market. Were England to admitthe import of the products of the Uni- 
ted States, she would find a better market for her own in those States. The Eng- 
lish government, by the exorbitance of its taxation upon import and consumption, 
virtually interdicts to its subjects many kinds of importation, thus obliging the 
merchant to ofier to foreign countries a higher price for those articles, whose im- 
port is practicable, as sugar, coSee, gold, silver, &c. for the price of the precious 
metals to them is enhanced by the low price of their commodities, which accounts 
for the ruinous returns of their commerce. 

I would not be understood to maintain in this chapter, that one product can not 
be raised in too great abundance, in relation to all others; but merely that nothing 
is more favourable to the demand of one product, than the supply of another; that 
the import of English manufactures into Brazil would cease te be excessive and 
be rapidly absorbed, did Brazil produce on her side returns sufiiciently ample ; 
to which end it would be necessary that the legislative bodies of either country 
should consent, the one to free production, the other to free importation. In Bra- 
zil every thing is grasped by monopoly, and property is not exempt from the in- 
vasion of the government. In England, the heavy duties are a serious obstruc- 
tion to the foreign commerce of the nation, inasmuch as they circumscribe the 
choice of returns. I happen myself to know of a most valuable and scientific col- 
lection of natural history, which could not be imported from Brazil into England 
by reason of the exorbitant duties. (a) 



(a) The views oi Sismondi, in this particular, have been since adopted by our 
own Malthas, and those of our author by Ricardo. This diiference of opinion 
has given rise to an interesting discussion between our author and Malthus, to 
whom he has recently addressed a correspondence on this and other parts of the 
science. Were any thing wanting to confirm the arguments of this chapter, it 
vrould be supplied by a reference to his Lettre \, a M. Malthus. Sismondi has 
vainly attempted to answer Ricardo, but has made no mention of his original an- 
tagonist. Vide Annales de Legislation, No. 1. art. 3. Geneve, 1820. T. 



CHAP. XV. ON PRODUCTION. 141 

have laid the value of his product on his own account, in the pur- 
chase, perhaps, not of a gown or surplice, but of some other more 
serviceable product. The consumption of the particular product, the 
gown or surplice, has but supplanted that of some other product. It 
is quite impossible that the purchase of one product can be afiected, 
otherwise than by the value of another.* 

From this important truth may be deduced the following important 
conclusions: — 

1. That, in every community the more numerous are the produ- 
cers, and the more various their productions, the more prompt, 
numerous, and extensive are the markets for those productions; and, 
by a natural consequence, the more profitable are they to the produ- 
cers; for price rises with the demand. But this advantage is to be 
derived from real production alone, and not from a forced circulation 
of products; for a value once created is not augmented in its passage 
from one hand to another, nor by being seized and expended by the 
government, instead of by an individual. The man, that lives upon 
the productions of other people, originates no demand for those pro- 
ductions; he merely puts himself in the place of the producer, to 
the great injury of production, as we shall presently see. 

2. That each individual is interested in the general prosperity of 
all, and that the success of one branch of industry promotes that of 
all the others. In fact, whatever profession or line of business a 
man may devote himself to, he is the better paid and the more 
readily finds employment, in proportion as he sees others thriving 
equally around him. A man of talent, that scarcely vegetates in a 
retrograde state of society, would find a thousand ways of turning 
his faculties to account in a thriving community that could aiford to 
employ and reward his ability. A merchant established in a rich 
and populous town, sells to a much larger amount than one who sets 
up in a poor district, with a population sunk in indolence and apathy. 
What could an active manufacturer, or an intelligent merchant, do in 
a small deserted and semi-barbarous town in a remote corner of 
Poland or Westphalia? Though in no fear of a competitor, he could 
sell but little, because little was produced; whilst at Paris, Amster- 
dam, or London, in spite of the competition of a hundred dealers in 
his own line, he might do business on the largest scale. The reason 
is obvious: he is surrounded with people who produce largely in an 
infinity of ways, and who make purchases, each with his respective 
products, that is to say, with the money arising from the sale of what 
he may have produced. 

This is the true source of the gains made by the towns' people out 
of the country people, and again by the latter out of the former; both 

* The capitalist, in spending the interest of his capital, spends his portion of the 
products raised by the employment of that capital. The general rules that regu- 
late the ratio he receives will be investigated in Book II., infra. Should he ever 
spend the principal, still he consumes products only; for capital consists of pro- 
ducts, devoted indeed to reproductive, but susceptible of unproductive consump- 
tion; to which it is in fact consigned whenever it is wasted or dilapidated. 



142 ON PRODUCTION. book i. 

of them have wherewith to buy more largely, the more ample they 
themselves produce. A city, standing in the centre of a rich sur- 
rounding country, feels no want of rich and numerous customers; 
and, on the other hand, the vicinity of an opulent city gives addi- 
tional value to the produce of the country. The division of nations 
into agricultural, manufacturing, and commercial, is idle enough. 
For the success of a people in agriculture is a stimulus to its manu- 
facturing and commercial prosperity; and the flourishing condition 
of its manufacture and commerce reflects a benefit upon its agricul- 
ture also.* 

The position of a nation, in respect of its neighbours, is analogous 
to the relation of one of its provinces to the others, or of the country 
to the town; it has an interest in their prosperity, being sure to profit 
by their opulence. The government of the United States, therefore, 
acted most wisely, in their attempt, about the year 1802, to civilize 
their savage neighbours, the Creek Indians. The design was to 
introduce habits of industry amongst them, and make them produc- 
ers capable of carrying on a barter trade with the States of the 
Union; for thei'e is nothing to be got by dealing with a people that 
have nothing to pay. It is useful and honourable to mankind, that 
one nation among so many should conduct itself uniformly upon 
liberal principles. The brilliant results of this enlightened policy 
will demonstrate, that the systems and theories really destructive 
and fallacious, are the exclusive and jealous maxims acted upon by 
the old European governments, and by them most impudently 
styled practical triiths, for no other reason, as it would seem, than 
because they have the misfortune to put them in practice. The 
United States will have the honour of proving experimentally, that 
true policy goes hand in hand with moderation and humanity. t 

* A productive establishment on a large scale is sure to animate the industry 
of the whole neighbourhood, " In Mexico," says Humboldt, " the best cultivat- 
ed tract, and that which brings to the recollection of the traveller the most beau- 
tiful part of French scenery, is the level country extending from Salamanca as 
far as Silao, Guanaxuato, and Villa de Leon, and encircling the richest mines of 
the known world. Wherever the veins of precious metal have been discovered 
and worked, even in the most desert parts of the Cordilleras, and in the most 
barren and insulated spots, the working of the mines, instead of interrupting the 
business of superficial cultivation, has given it more than usual activity. The 
opening of a considerable vein is sure to be followed by the immediate erection 
of a town; farming concerns are established in the vicinity; and the spot so lately 
insulated in the midst of wild and desert mountains, is soon brought into contact 
with the tracts before in tillage." Essai pol. sur. la Nouv. Espagnc. 

f It is only by the recent advances of political economy, that these most 
important truths have been made manifest, not to vulgar apprehension alone, but 
even to the most distinguished and enlightened observers. We read in Voltaire 
that " such is the lot of humanity, that the patriotic desire for one's country's 

grandeur, is but a wish for the humiliation of one's neighbours ; that it is 

clearly impossible for one country to gain, except by the loss of another." {Diet. 
Phil. Art. Patrie.) By a continuation of the same false reasoning, he goes on to 
declare, that a thorough citizen of the world cannot wish his country to be 
greater or less, richer or poorer. It is true, that he would not desire her to extend 
the limits of her dominion, because, in so doing, she might endanger her own 



CHAP. XV. ON PRODUCTION. 143 

3. From this fruitful principle, we may draw this further conclu- 
sion, that it is no injury to the internal or national industry and pro- 
duction to buy and import commodities from abroad; for nothing can 
be bought from strangers, except with native products, which find a 
vent in this external traffic. Should it be objected, that this foreign 
produce may have been bought with specie, I answer, specie is not 
always a native product, but must have been bought itself with the 
products of native industry; so that, whether the foreign articles be 
paid for in specie or in home products, the vent for national indus- 
try is the same in both cases.* 

4. The same principle leads to the conclusion, that the encourage- 
ment of mere consumption is no benefit to commerce; for the diffi- 
culty lies in supplying the means, not in stimulating the desire of 
consumption; and we have seen that production alone, furnishes 
those means. Thus, it is the aim of good government to stimulate 
production, of bad government to encourage consumption. 

For the same reason that the creation of a new product is the 
opening of a new market for other products, the consumption or 
destruction of a product is the stoppage of a vent for them. This is 
no evil where the end of the products has been answered by its 
destruction, which end is the satisfying of some human want, or the 
creation of some new product designed for such a satisfaction. 
Indeed, if the nation be in a thriving condition, the gross national 
reproduction exceeds the gross consumption. The consumed pro- 
ducts have fulfilled their office, as it is natural and fitting they 
should; the consumption, however, has opened no new market, but 
just the reverse. t 

Having once arrived at the clear conviction, that the general 
demand for products is brisk in proportion to the activity of produc- 
tion, we need not trouble ourselves much to inquire towards what 
channel of industry production may be most advantageously directed. 
The products created give rise to various degrees of demand, accord- 
ing to the wants, the manners, the comparative capital, industry, and 

well-being ; but he will desire her to progress in wealth, for her progressive 
prosperity promotes that of all other nations. 

* This effect has been sensibly experienced in Brazil of late years. The large 
imports of European commodities, which the freedom of navigation directed to 
the markets of Brazil, has been favourable to its native productions and^com- 
merce, that Brazilian products never found so good a sale. So there is an 
instance of a national benefit arising from importation. By the way, it might 
have perhaps been better for Brazil if the prices of her pro4ucts and the 
profits of her producers had risen more slowly and gradually ; for exorbitant 
prices never lead to the establishment of a permanent commercial intercourse; it 
is better to gain by the multiplication of one's own products than by their 
increased price. 

J If the barren consumption of a product be of itself adverse to reproduction, 
a diminution ^ro tanto of the existing demand or vent for produce, how shall 
we designate, that degree of insanity, which would induce a government delibe- 
rately to burn and destroy the imports of foreign products, and thus to annihilate 
the sole advantage accruing from unproductive consumption, that is to say, the 
gratification of the wants of the consumer ? 



144 ON PRODUCTION. book i. 

natural resources of each country; the article most in request, 
owing to the competition of buyers, yields the best interest of money 
to the capitalist, the largest profits to the adventurer, and the best 
wages to the labourer; and the agency of their respective services is 
naturally attracted by these advantages towards those particular 
channels. 

In a community, city, province, or nation, that produces abun- 
dantly, and adds every moment to the sum of its products, almost all 
the branches of commerce, manufacture, and generally of industry, 
yield handsome profits, because the demand is great, and because 
there is always a large quantity of products in the market, ready to 
bid for new productive services. And, vice versa, wherever, by 
reason of the blunders of the nation or its government, production is 
stationary, or does not keep pace with consumption, the demand 
gradually declines, the value of the product is less than the charges 
of its production; no productive exertion is properly rewarded; pro- 
fits and wages decrease; the employment of capital becomes less 
advantageous and more hazardous; it is consumed piecemeal, not 
through extravagance, but through necessity, and because the sources 
of profit are dried up.* The labouring classes experience a want of 
work; families before in tolerable circumstances, are more cramped 
and confined; and those before in difficulties are left altogether des- 
titute. Depopulation, misery, and returning barbarism, occupy the 
place of abundance and happiness. 

Such are the concomitants of declining production, which are 
only to be remedied by frugality, intelligence, activity, and freedom. 



CHAPTER XVI. 

OP THE BENEFITS RESULTING FROM THE QUICK CIRCULATION OP 
MONEY AND COMMODITIES. 

It is common to hear people descant upon the benefits of an active 
circulation; that is to say, of numerous and rapid sales. It is mate- 
rial to appreciate them correctly. 

The values engaged in actual production can not be realised and 
employed in production again, until arrived at the last stage of com- 
pletion, and sold to the consumer. The sooner a product is finished 
and sold, the sooner also can the portion of capital vested in it be 
applied to the business of fresh production. The capital being 
engaged a shorter time, there is less interest payable to the capi- 

* Consumption of this kind gives no encouragement to future production, but 
devours products already in existence. No additional demand can be created, 
until there be new products raised; there is only an exchange of one product for 
another. Neither can one branch of industry suffer without affecting the rest. 



CHAP. XVI. ON PRODUCTION. 145 

talist; there is a saving in the charges of production; it is, therefore, 
an advantage, that the successive operations performed in the course 
of production should be rapidly executed. 

By way of illustrating the -effects of this activity of circulation, 
let us trace them in the instance of a piece of printed calico.* 

A Lisbon trader imports the cotton from Brazil. It is his inter- 
est that his factors in America be expeditious in making purchases 
and remitting cargoes, and likewise, that he meet no delay in selling 
his cotton to a French merchant; because he thereby gets his returns 
the sooner, and can sooner recommence a new and equally lucrative 
operation. So far, it ^s Portugal that benefits by the increased 
activity of circulation; the subsequent advantage is on the side of 
France. If the French merchant keep the Brazil cotton but a short 
time in his warehouse, before he sells it to the cotton-spinner, if the 
spinner after spinning sell it immediately to the weaver, if the 
weaver dispose of it forthwith to the calico printer, and he in his turn 
sell it without much delay to the retail dealer, from whom it quickly 
passes to the consumer, this rapid circulation will have occupied for 
a shorter period the capital embarked by these respective producers; 
less interest of capital will have been incurred; consequently the 
prime cost of the article will be lower, and the capital will have 
been the sooner disengaged and applicable to fresh operations. 

All these different purchases and sales, with many others that, for 
brevity's sake, I have not noticed, were indispensable before the 
Brazil cotton could be worn in the shape of printed calicoes. They 
are so many productive fashions given to this product; and the more 
rapidly they may have been given, the more benefit will have been 
derived from the production. But, if the same commodity be 
merely sold several times over in a year in the same place, without 
undergoing any fresh modification, this circulation would be a loss 
instead of a gain, and would increase instead of reducing the prime 
cost to the consumer. A capital must be employed in buying and 
re-selling, and interest paid for its use, to say nothing of the proba- 
ble wear and tear of the commodity. 

Thus, jobbing in merchandise necessarily causes a loss, either to 
the jobber, if the price be not raised by the transaction, or to the 
consumer, if it be raised.t 

The activity of circulation is at the utmost pitch to which it can 
be carried with advantage, when the product passes into' the hands 
of a new productive agent the instant it is fit to receive a new modi- 

* The term circulation, as well as many others employed in the science of 
political economy, is daily made use of at random, even by persons that pride 
themselves .upon their precision. " The more equally circulation is diffused," 
says La Harpe., in one of his works, " the less indigence is to be found in the 
community." With great deference to the learned academician, what possible 
meaning can the word circulation have in this passage 1 

I The trade of speculation, as we have before observed, {supra, Chap. IX.) is 
sometimes of use in withdrawing an article from circulation, when its price is 
so low as to discourage the producer, and restoring it to circulation, when th^t 
price is unnaturally raised upon the consumer. 
19 



146 ON PRODUCTION. book i. 

fication, and is ultimately handed over to the consumer, the instant 
it has received the last finish. All kind of activity and bustle not 
tending to this end, far from giving additional activity to circulation, 
is an impediment to the course of praduction — an obstacle to circu- 
lation by all means to be avoided. 

With respect to the rapidity of production arising from the more 
skilful direction of industry, it is an increase of rapidity not in cir- 
culation, but in productive energy. The advantage is analogous; it 
abridges the amount of capital employed. 

I have made no distinction between the circulation of goods and 
of money, because there really is none. While a sum of money lies 
idle in a merchant's coffers, it is an inactive portion of his capital, 
precisely of the same nature as that part of his capital which is 
lying in his warehouse in the shape of goods ready for sale. 

The best stimulus of useful circulation is, the natural wish of all 
classes, especially the producers themselves, to incur the least possi- 
ble amount of interest upon the capital embarked in their respective 
undertakings. Circulation is much more apt to be interrupted by 
the obstacles thrown in its way, than by the want of proper encour- 
agement. Its greatest obstructions are, wars, embargoes, oppressive 
duties, the dangers and difl&culties of transportation. It flags in 
times of alarm and uncertainty, when social order is threatened, and 
all undertakings are hazardous. It flags, too, under the general dread 
of arbitrary exactions, when every one tries to conceal the extent of 
his ability. Finally, it flags in times of jobbing and speculation, 
when thesudden fluctuations caused by gambling in produce, make 
people look for a profit from every variation of mere relative price: 
goods are then held back in expectation of a rise, and money in the 
prospect of a fall; and, in the interim, both these capitals remain 
inactive and useless to production. Under such circumstances, there 
is no circulation, but of such products as cannot be kept without 
danger of deterioration; as fruits, vegetables, grain, and all articles 
that spoil in the keeping. With regard to them, it is thought wiser 
to incur the loss of present sale, whatever it be, than to risk con- 
siderable or total loss. If the national money be deteriorated, it 
becomes an object to get rid of it in any way, and exchange it for 
commodities. This was one of the causes of the prodigious circula- 
tion that took place during the progressive depreciation of the 
French assignats. Every body was anxious to find some employ- 
ment for a paper currency, whose value was hourly depreciating; it 
was only taken to be re-invested immediately, and one might have 
supposed it burnt the fingers it passed through. On that occasion, 
men plunged into business, of which they were utterly ignorant; 
manufactures were established, houses repaired and furnished, no 
expense was spared even in, pleasure; until at length all the value 
each individual possessed in assignats was finally consumed, invest- 
ed or lost altogether* 



CHAP. xvir. ON PRODUCTION. 147 



CHAPTEH XVII. 

OP THE EFFECT OF GOVERNMENT REGULATIONS INTENDED TO 
INFLUENCE PRODUCTION. 

Strictly speaking, there is no act of government but what has 
some influence upon production. I shall confine myself in this chap- 
ter to such as are avowedly aimed at the exertion of such influence; 
reserving the efiects of the monetary system, of loans, and of taxes, 
to be treated of in distinct chapters. 

The object of governments, in their attempts to influence produc- 
tion, is, either to prescribe the raising of particular kinds of produce 
which they judge more advantageous than others, or to prescribe 
methods of production, wlwch they imagine preferable to other 
methods. The effects of this two-fold attempi upon national wealth 
will be investigated in the two first sections of this chapter; in the 
remaining two, I shall apply the same principles to the particular 
cases of privileged companies, and of the corn-trade, both on account 
of their vast importance, and for the purpose of further explaining 
and illustrating the principles. We shall see, by the way, what rea- 
sons and circumstances will require or justify a deviation from gene- 
ral principles. The grand mischiefs of authoritative interference 
proceed not from occasional exceptions to established maxims, but 
from false ideas of the nature of things, and the false maxims built 
upon them. It is then that mischief is done by wholesale, and evil 
pursued upon system; for it is well to beware, that no set of men are 
more bigoted to system, than those who boast that they go upon 
none.* 

Section I. 
Effect of Regulations prescribing the Nature of Products. 

The natural wants of society, and its circumstances for the time 
being, occasion a more or less lively demand for particular kinds of 
products. Consequently, in these branches of production, produc- 
tive services are somewhat better paid than in the rest; that is to say, 
the profits upon land, capital and labour, devoted to those branches 
of production, are somewhat larger. This additional profit naturally 

* The greatest sticklers for adhering to practical notions, set out with the 
assertion of general principles : they begin, for instance, with saying, that no 
one can dispute the position, that one individual can gain only what another 
loses, and one nation profit only by the sacrifices of another. What is this but 
system'? and one so unsound, that its abettors, instead of possessing more prac- 
tical knowledge than other people, show their utter ignorance of many facts, the 
acquaintance with which is indispensable to the formation of a correct judgment. 
No man, who understands the real nature of production, and sees how new wealth 
may be, and is daily created, would attempt to advance so gross an absurdity. 



148 ON PRODUCTION. book i. 

attracts producers, and thus the nature of the products is always 
regulated by the wants of society. We have seen in a preceding 
chapter (XV.,) that these wants are more ample in proportion to the 
sum of gross production, and that society in the aggregate is a larger 
purchaser, in proportion to its means of purchasing. 

When authority throws itself in the way of this natural course of 
things, and says, the product you are about to create, that which 
yields the greatest profit, and is consequently the most in request, is 
by no means the most suitable to your circumstances, you must 
undertake some other, it evidently directs a portion of the produc- 
tive energies of the nation towards an object of less desire, at the 
expense of another object of more urgent desire. 

In France, about the year 1794, there were some persons perse- 
cuted, and even brought to the scaffold, for having converted corn- 
land into pasturage. Yet the moment these unhappy people found 
it more profitable to feed cattle than to grow corn, one might have 
been sure that society stood more in need of cattle than of corn, 
and that greater value could be produced in one way than in the 
other. 

But, said the public authorities, the value produced is of less 
importance than the nature of the product, and we would rather 
have you raise 10 dollars worth of grain than 20 dollars worth of 
butcher's meat. In this they betrayed their ignorance of this sim- 
ple truth, that the greatest product is always the best; and that an 
estate, which should produce in butcher's meat wherewith to pur- 
chase twice as much wheat as could have been raised upon it, pro- 
duces, in reality, twice as much wheat as if it had been sowed with 
grain; since wheat to twice the amount is to be got for its product. 
This way of getting wheat, they will tell you, does not increase its 
total quantity. True, unless it be introduced from abroad; but 
nevertheless, this article must at the time be relatively more plenti- 
ful than butcher's meat, because the product of two acres of wheat 
is given for that of one acre of pasture.* And, if wheat be suffi- 
ciently scarce, and in sufficient request to make tillage more profita- 
ble than grazing, legislative interference is superfluous altogether; 
for self-interest will make the producer turn his attention to the 
former. 

The only question then is, which is the most likely to know what 
kind of cultivation yields the largest returns, the cultivator or the 
government; and we may fairly take it for granted, that the culti- 
vator, residing on the spot, making it the object of constant study 
and inquiry, and more interested in success than any body, is better 
informed in this respect than the government. 

* At the disastrous period in question, there was no actual want of wheat; 
the growers merely felt a disinclination to sell for paper money. Wheat was 
sold for real value at a very reasonable rate; and, though a hundred thousand 
acres of pasture land had been converted into arable, the disinclination to 
exchange wheat for a discredited paper-money would not have been a jot 
reduced. 



CHAP. XVII. ON PRODUCTION. 149 

Should it. be insisted upon in argument, that the cultivator knows 
only the price-current of the day, and does not, like the government, 
provide for the future wants of the people, it may be answered, that 
one of the talents of a producer, and a talent his own interest 
obliges him assiduously to cultivate, is not the mere knowledge, but 
the fore-knowledge of human wants.* 

An evil of the same description was occasioned, when, at another 
period, the proprietors were compelled to cultivate beet-root, or woad 
in lieu of grain: indeed, we may observe, en passant, that it is 
always a bad speculation to attempt raising the products of the 
torrid, under the sun of the temperate latitudes. The saccharine 
and colouring juices, raised on the European soils with all the 
forcing in the world, are very inferior in quantity and quality to 
those that grow in profusion in other climates;t while, on the other 
hand, those soils yield abundance of grain and fruits too bulky and 
heavy to be imported from a distance. In condemning our lands to 
the growth of products ill suited to them, instead of those they are 
better calculated for, and, consequently, buying very dear what we 
might have cheap enough, if we would consent to receive them 
from places where they are produced with advantage, we are our- 
selves the victims of our own absurdity. It is the very acme of 
skill, to turn the powers of nature to best account, and the height of 
madness to contend against them; which is in fact wasting part of 
our strength, in destroying those powers she designed for our aid. 

Again, it is laid down as a maxim, that it is better to buy products 
dear, when the price remains in the country, than to get them cheap 
from foreign growers. On this point I must refer my readers to that 
analysis of production which we have just gone through. It will 
there be seen, that products are not to be obtained without some 
sacrifice, — without the consumption of commodities and productive 
services in some ratio or other, the value of which is in this way 
as completely lost to the community, as if it were to be exported.^ 

* Of course, in extraordinary cases, like that of a siege or a blockade, ordi- 
nary rules of conduct must be disregarded. However irksome the necessity, 
violent obstructions to the natural course of human affairs must be removed by 
counteracting violence ; poison is in dangerous cases resorted to as a medicine; 
but these remedies require extreme care and skill in the application. 

f M. de Humboldt has remarked, that seven square leagues of land in a tropi- 
cal climate, can furnish as much sugar as the utmost consumption of France, in 
its best days, has ever required. 

-^ In the sequel of this chapter, it will be shown, that values exported give 
precisely the same encouragement to domestic industry, as if they are consumed 
at home. In the instance just cited, suppose that wine had been grown instead 
of the sugar of beet-root, or the blue dye of woad, the domestic and agricultural 
industry of the nation would have been quite as much encouraged. And, since 
the product would have been more congenial to the climate, the wine produced 
from the same land would have procured a larger quantity of colonial sugar 
and indigo through the channel of commerce, even if conducted by neutrals or 
enemies. The colonial sugar and indigo would have been equally the product 
of our own land, though first assuming the shape of wine; only the same 
space of land would have produced them in superior quantity and quality. And 
the encouragement to domestic industry would be the same, or rather would be 



150 ON PRODUCTION. book i. 

I can hardly suppose any government will be bold enough to 
object, that it is indifferent about the profit, which might be derived 
from a more advantageous production, because it would fall to the 
lot of individuals. The worst governments, those which set up 
their own interest in the most direct opposition to that of their 
subjects, have by this time learnt, that the revenues of individuals 
are the regenerating source of public revenue; and that, even under 
despotic and military sway, where taxation is mere organized spolia- 
tion, the subjects can pay only what they have themselves acquired. 

The maxims we have been applying to agriculture are equally 
applicable to manufacture. Sometimes a government entertains a 
notion, that the manufacture of a native raw material is better for 
the national industry, than the manufacture of a foreign raw material. 
It is in conformity to this notion, that we have seen instances of pre- 
ference given to the woollen and linen above the cotton manufac- 
ture. By this conduct we contrive, as far as in us lies, to limit the 
bounty of nature, which pours forth in different climates a variety 
of materials adapted to our innumerable wants. Whenever human 
efforts succeed in attaching to these gifts of nature a value, that is to 
say, a degree of utility, whether by their import, or by any modifi- 
cation we may subject them to, a useful act is performed, and an 
item added to national wealth. The sacrifice we make to foreigners 
in procuring the raw material is not a whit more to be regretted, 
than the sacrifice of advances and consumption, that must be made 
in every branch of production, before we can get a new product. 
Personal interest is, in all cases, the best judge of the extent of the 
sacrifice, and of the indemnity we may expect for it; and, although 
this guide may sometimes mislead us, it is the safest in the long run, 
as well as the least costly.* 

But personal interest is no longer a safe criterion, if individual 

greater ; because a product of superior value would reward more amply the 
agency of the land, capital, and industry, engaged in the production. 

* One is obliged every moment to turn round and combat objections, that 
never could have been started, if the science of political economy had been more 
widely diffused. It will here, for instance, in all probability, be said, — granting 
that the sacrifice made in the purchase of the raw flax for manufacture, and that 
made in the purchase of cotton, is to the manufacturer or merchant equal in the 
one case and the other, — still, in the one case, the amount of the sacrifice is ex- 
pended and consumed in the nation itself, and conduces to the national advan- 
tage; in the other, the whole advantage goes to the, foreign grower. I answer, 
the advantage goes to the nation in either case; for the foreign raw material, 
cotton, cannot be purchased, except with a domestic product, which must be 
bought of the national grower before the merchant can go to market; whether 
flax or any thing else, it must be some value of domestic creation. Why may 
he not buy with money] Money itself must have been originally purchased 
with some other product, which must have employed domestic industry, as 
much as the growth of flax. Turn it which way you will, it comes to the same 
thing in the end. Wealth can only be acquired by the production of value, or 
lost by its consumption; and, putting absolute robbery out of the question, the 
whole consumption of a nation must always be supplied from its internal re- 
sources, its land, capital, and industry, even that portion of it which falls upon 
external objects. 



CHAP. XVII. ON PRODUCTION. 151 

interests are not left to counteract and control each other. If one 
individual, or one class, can call in the aid of authority to ward off 
the effects of competition, it acquires a privilege to the prejudice and 
at the cost of the whole community; it can then make sure of profits 
not altogether due to the productive services rendered, but composed 
in part of an actual tax upon consumers for its private profit; which 
tax it commonly shares with the authority that thus unjustly lends 
its support. 

The legislative body has great difficulty in resisting the importu- 
nate demands for this kind of privileges; the applicants are the pro- 
ducers that are to benefit thereby, who can represent, with much 
plausibility, that their own gains are a gain to the industrious classes, 
and to the nation at large, their workmen and themselves being 
members of the industrious classes, and of the nation.* 

When the cotton manufacture was first introduced in France, all 
the merchants of Amiens, Rheims, Beauvais, &c. joined in loud 
remonstrances, and represented, that the industry of these towns 
was annihilated. Yet they do not appear less industrious or rich 
than they were fifty years ago; while the opulence of Rouen and 
all Normandy has been wonderfully increased by the new fabric. 

The outcry was infinitely greater, when printed calicoes first 
came into fashion; all the chambers of commerce were up in arms; 
meetings, discussions every where took place; memorials and depu- 
tations poured in from every quarter, and great sums were spent 
in the opposition. Rouen now stood forward to represent the 
misery about to assail her, and painted, in moving colours, "old 
men, women, and children, rendered destitute; the best cultivated 
lands in the kingdom lying waste, and the whole of a rich and 
beautiful province depopulated." The city of Tours urged the 
lamentations of the deputies of the whole kingdom, and foretold 
" a commotion that would shake the frame of social order itself." 
Lyons could not view in silence a project " which filled all her 
manufactories with alarm." Never on so important an occasion 
had Paris presented itself at the foot of a throne, " watered with the 
tears of commerce." Amiens viewed the introduction of printed 
calicoes as the gulf that must inevitably swallow up all the manu- 
factures of the kingdom. The memorial of that city, drawn up at 
a joint meeting of the three corporations, and signed unanimously, 
ended in these terms: "To conclude, it is enough for the eternal 
prohibition of the use of printed calicoes, that the whole kingdom 
is chilled with horror at the news of their proposed toleration. 
Vox populi vox dei.^^ 

Hear what Roland de la Platiere, who had the presentation of 
these remonstrances in quality of inspector-general of manufactures, 
says on this subject, " Is there a single individual at the present 

* No one cries out against them, because very few know who it is that pays 
the gains of the monopolist. The real sufferers, the consumers themselves, 
often feel the pressure, without being aware of the cause of it, and are the first 
to abuse the enlightened individuals, who are really advocating their interests. 



152 ON PRODUCTION. book i. 

moment, who is mad enough to deny, that the fabric of printed 
calicoes employs an immense number of hands, what with the 
dressing of cotton, the spinning, weaving, bleaching, and printing? 
This article has improved the art of dying in a few years, more 
than all the other manufactures together have done in a century." 

I must beg my readers to pause a moment, and reflect, what firm- 
ness and extensive information respecting the sources of public 
prosperity were necessary to uphold an administration against so 
general a clamour, supported, amongst the principal agents of autho- 
rity, by other motives, besides that of public utility. 

Though governments have too often presumed upon their power 
to benefit the general wealth, by prescribing to agriculture and 
manufacture the raising of particular products, they have interfered 
much more particularly in the concerns of commerce, especially of 
external commerce. These bad consequences have resulted from a 
general system, distinguished by the name of the exchtsive or mer- 
cantile system, which attributes the profits of a nation to what is 
technically called a favourable balance of trade. Before we enter 
upon the investigation of the real efiect of regulations, intended 
to secure to a nation this balance in its favour, it may be as well to 
form some notion of what it really is, and what is its professed 
object; which I shall attempt in the following 

DIGRESSION, 

UPON WHAT IS CALLED THE BALANCE OF TRADE. 

The comparison a nation makes between the value of its exports 
to, and that of its imports from, foreign countries, forms what is called 
the balance of its trade. If it have exported more commodities 
than it has imported, it is taken for granted that the nation has to 
receive the difference in gold or silver; and the balance of trade is 
then said to be in its favour; and when the case is reversed, the 
balance is said to be against it. 

The exclusive system proceeds upon these maxims: 1. That the 
commerce of a nation is advantageous, in proportion as its exports 
exceed its imports, and as there is a larger cash balance receivable in 
specie, or in the precious metals: 2. That by means of duties, prohi- 
bitions, and bounties, the governmeht can make that balance more 
in favour of, or less against the nation. 

These two maxims must be analysed minutely in the first place; 
then, let us see what is the course of practice. 

When a merchant sends goods abroad, he causes them to be there 
sold, and receives, by the hands of his foreign correspondents, the 
price of his goods, in the money of the country. If he expects to 
make a profit upon the return cargo, he causes that price to be laid 
out in foreign produce, and remitted home to him. The operation 
is with little variation the same, when he begins at the other end; 
that is to say, by making purchases abroad, which he pays for by 



CHAP. xvii. ON PRODUCTION. 153 

remitting domestic products thither. These operations are not 
always executed on account of the same merchant. It sometimes 
happens that the trader, who undertakes the outward, will not under- 
take the homeward adventure. In that case he draws bills payable 
after date, or upon sight, upon his correspondents, by whom the 
goods have been sold: these bills he sells or negotiates, to somebody, 
v^rho sends them to the place they are drawn upon, where they are 
made use of in the purchase of fresh goods, which the last mentioned 
person imports himself.* 

In both cases, one value is exported, another value is imported in 
return; but we have not stopt to inquire, if any part of the value 
either exported or imported consisted of the precious metals. It 
may reasonably be assumed, that merchants, when left the free 
choice of what goods they will speculate in, will prefer those that 
offer the largest profit; that is to say, those which will bear the 
greatest value when they arrive at the place of destination. For 
example, a French merchant has consigned brandies to England, 
and has to receive from England for such his consignment, 1000/. 
sterling: he naturally sits down to calculate the difference between 
what he will receive, if he import his 1000/. in the shape of the 
precious metals, and what he will receive, if he import that sum in 
the shape of cotton manufactures, t 

* What has been said of one trader, may be said equally of two — three, — in 
short, of all the traders in the nation. As far as concerns the balance of com- 
merce, the operations of the whole will resolve themselves into what I have 
just stated. Individual losses may occur on either side, from the folly or knavery 
of some few of the traders engaged; but we may take it for granted, that they 
will, on the average, be inconsiderable, in comparison v/ith the total of business 
done; at all events, the losses on the one side will commonly balance those on 
the other. 

It is of very little importance to our purpose to inquire, by whom the charge 
of transport is borne: usually, the English trader pays the freight of the goods 
he buys, and imports from France, and the French trader does the same upon his 
purchases from England; both of them look for the reimbursement of this outlay 
to the value added to the articles by the circumstance of transport. 

f It may be well here to point out a manifest blunder of some partisans of the 
exclusive system. They look upon nothing that a nation receives from abroad as 
a national gain, except what is received in the form of specie; which is in effect, 
to maintain, that a hatter who sells a hat for 5 dollars gains the whole 5 dollars, 
because he receives it in specie. But this cannot be; money, like other things, 
is itself a commodity. A French merchant consigns to England, brandies to 
amount of 20,000 frs.: his commodity was equivalent in France to that sum in 
specie; if it sell in England for 1000/. sterling, and that sum remitted in gold or 
silver be worth 24,000//-. there is a gain of 4000 /r. only, although France has 
received 24,000//-. in specie. And, should the merchant lay out his 1000/. ster- 
ling in cotton goods, and be able to sell them in France for 28,000//-. there would 
then be a gain to the importer and to the nation of 8000 /r., although no specie 
whatever had been brought into the country. In short, the gain is precisely the 
excess of the value receired above the value given for it, whatever be the form 
in which the import is made. 

It is curious enough, that the more lucrative external commerce is, the greater 

must be the excess of the import above the export; and that the very thing, 

which the partisans of the exclusive system deprecate as a calamity, is of all 

things to be desired. I will explain why. When there has been an export of 

20 



154 ON PRODUCTION. book i. 

If the merchant find it more advantageous to get his returns in 
goods than in specie, and if it be admitted, that he knows his own 
interest better than any body else, the sole point left for discussion 
is, whether returns in specie, though less advantageous to the mer- 
chant, may not be better for the nation, than returns of any other 
article: whether, in short, it be desirable in a national point of 
view, that the precious metals should abound, in preference to any 
other commodity. 

What are the functions of the precious metals in the community? 
If shaped into trinkets or plate, they serve for personal ornament, for 
the splendour of our domestic establishments, or for a variety of 
domestic purposes; they are converted into watch-cases, spoons, 
forks, dishes, coffee-pots; or rolled out into leaves for the embellish- 
ment of picture frames, book-binding, and the like; in which case, 
they form part of that portion of the capital of the community, which 
yields no interest, but is devoted to the production of utility or plea- 
sure. It is doubtless an advantage to the nation, that the material, 
whereof this portion of its capital consists, should be cheap and abun- 
dant. The enjoyment they afford in these various ways is then 
obtained at a lower rate, and is more widely diffused. There are 
many establishments on a moderate scale, which, but for the disco- 
very of America, would have been unable to make the show of plate 
that is now seen upon their tables. But this advantage must not be 
over-rated; there are other utilities of a much higher order. The 

10, and an import in return of 11 millions, there is in the nation a value of 1 mil- 
lion more than before the interchange. And, in spite of the specious statements 
of the balance of commerce, this must almost always be so, otherwise the 
traders would gain nothing. In fact, the value of the export is estimated at its 
value before shipment, which is increased by the time it reaches the destination: 
with this augmented value the return is purchased, which also receives a like 
accession of value by the transport. The value of this import is estimated at the 
time of entry. Thus, the result is the presence of a value equal to that exported, 
plus the gains outward and homeward. Wherefore, in a thriving country, the 
value of the total imports should always exceed that of the exports. What then 
are we to think of the Report of the French Minister of the Interior of 1813, who 
makes the total exports to have been 383 millions o{ francs, and the total imports, 
inclusive of specie, but 350 millions; a statement upon which he felicitates the 
nation, as the most favourable that had ever been presented. Whereas, this 
balance shows, on the. contrary, what every body felt and knew, that the com- 
merce of France was then making immense losses, in consequence of the blun- 
ders of her administration, and the total ignorance of the first principles of politi- 
cal economy. 

In a tract upon the kingdom of Navarre in Spain, {Annales des Voyages, torn. i. 
p. 312,) I find it stated, that, on comparison of the value of the exports with that 
of the imports of that kingdom, there is found to be an annual excess of the 
former above the latter of 120,000 dollars. Upon which the author very sagely 
observes, "that if there be one truth more indisputable than another, it is this, 
that a nation which is growing rich can not be importing more than it is export- 
ing, for then its capita] must diminish perceptibly. And, since Navarre is in a 
state of gradual improvement, as appears from the advance of population and 
comfort, it is clear," — that I know nothing about the matter, he might have 
added; — " for 1 am citing an established fact to give the lie to an indisputable 
principle." We are every day witnessing contradictions of the same kind. 



CHAP. XVII. ON PRODUCTION. 155 

window-glass, that keeps out the hiclemency of the weather, is of 
much more importance to our comfort, than any species of plate 
whatsoever; yet no one has ever thought of encouraging its import 
or production by special favour or exemptions. 

The other utility of the precious metals is, to act as the material 
of money, that is to say, of that portion of the national capital, 
which is employed in facilitating the interchange of existing values 
between one individual and another. For this purpose, is it any 
advantage that the material selected should be abundant and cheap? 
Is a nation, that is more amply provided with that material, richer 
than one which is more scantily supplied? 

I must here take leave to anticipate a position, established in 
Chap. XXI. of this book, wherein the subject of money is considered, 
namely, that the total business of national exchange and circulation, 
requires a given quantity of the commodity, money, of some amount 
or other. There is in France a daily sale of so much wheat, cattle, 
fuel, property movable and immovable, which sale requires the 
daily intervention of a given value in the form of money, because 
every commodity is first converted into money, as a step towards its 
further conversion into other objects of desire. Now, whatever be 
the relative abundance or scarcity of the article money, since a given 
quantum is requisite for the business of circulation, the money 
must of course advance in value, as it declines in quantity, and de- 
cline in value as it advances in quantity. Suppose the money of 
France to amount now to 3000 millions oi francs,^ and that by some 
event, no matter what, it be reduced to 1500 millions; the 1500 mil- 
lions will be quite as valuable as the 3000 millions. The demands 
of circulation require the agency of an actual value of 3000 millions; 
that is to say, a value equivalent to 2000 millions of pounds of sugar, 
(taking sugar at 30 soxts per lb.) or to 180 millions of hectolitres of 
wheat (taking wheat at 20 fr. the hectolitre). Whatever be the 
weight or bulk of the material, whereof it is made, the total value of 
the national money will still remain at that point; though in the latter 
case, that material will be twice as valuable as in the former. An 
ounce of silver will buy eight instead of four lbs. of sugar, and so 
of all other commodities; and the 1500 millions of coin will be equiva- 
lent to the former 3000. But the nation will be neither richer nor 
poorer than before. A man who goes to market with a less quantity 
of coin, will be able to buy with it the same quantity of commodities. 
A nation that has chosen gold for the material of its money, is equally 
rich with one that has made choice of silver, though the volume of 
its money be much less. Should silver become fifteen times as 
scarce as at present, that is to say, as scarce as gold now is, an ounce 
of silver would perform the same functions, in the character of money, 
as an ounce of gold now does; and wc should be equally rich in 
money. Or, should it fall to a par with copper, we should not be a 

* 564 millions of dollars. 



156 ON PRODUCTION. book i. 

jot the richer in the article of money; we should merely be encum- 
bered with a more bulky medium of circulation. 

On the score, then, of the other utilities of the precious metals, and 
on that score only their abundance makes a nation richer, because it 
extends the sphere of those utilities, and diffuses their use. In the 
character of money, that abundance no wise contributes to national 
enrichment;* but the habits of the vulgar lead them to pronounce an 
individual rich, in proportion to the quantity of money he is possess- 
ed of; and this notion has been extended to national wealth, which 
is made up of the aggregate of individuals' wealth. Wealth, how- 
ever, as before observed, consists, not in the matter or substance, but 
in the value of that matter or substance. A money of large, is worth 
no more than a money of small volume; neither is a money of small, 
of less value than one of large volume. Value, in the form of com- 
modities, is equivalent to value to the same amount in the form of 
money. 

It may be asked, why, then, is money so generally preferred to 
commodities, when the value on both sides is equal? This requires 
a little explanation. When I come to treat of money, it will be 
shown, that coined metal of equal value commands a preference, 
because it insures to the holder the attainment of the objects of desire 
by means of one exchange instead of two. He is not, like the holder 
of any other commodity, obliged, in the first instance, to exchange 
his own commodity, money, for the purpose of obtaining, by a 
second exchange, the object of his desire; one act of exchange suffices; 
and this it is, cofnbined with the extreme facility of apportionment, 
aflTorded by graduated denominations of the coin, which renders it so 
useful in exchanges of value. Every individual, who has an ex- 
change to make, becomes a consumer of the commodity, money; 
that is to say, every individual in the community; which accounts 
for the universal preference of money to commodities at large, where 
the value is equal. 

* It is « necessary inference from these positions, that a nation gains in 
wealth by the partial export of its specie, because the residue is of equal value 
to the total previous amount, and the nation receives an equivalent for the portion 
exported. How is this to be accounted for? By the peculiar property of money 
to exhibit its utility in the exercise, not of its physical or material qualities, but 
those of its value alone. A less quantity of bread will less satisfy the cravings 
of hunger; but a less quantity of money may possess an equal amount of utility; 
for its value augments with the diminution of its volume, and its value is the 
sole ground of its employment. 

Whence it is evident, that governments should shape their course in the oppo- 
site direction to that pursued at present, and encourage, instead of discouraging, 
the export of specie. And so they assuredly will, when they shall understand 
their business better: or rather, they will attempt neither the one nor the other, 
for it is impossible, that any considerable portion of the national specie can leave 
the country, without raising the value of the residue. And when it is raised, 
less of it is given in exchange for commodities, which are then low in price, so as 
to make it advantageous again to import specie and export commodities; by which 
action and reaction the quantity of the precious metals is, in spite of all regula- 
tions, kept pretty nearly at the amount required by the wants of the nation. 



CHAP. xvii. ON PRODUCTION. 157 

But this superiority of money, in the interchange between indivi- 
duals, does not extend to that between nation and nation. In the 
latter, money, and, «yb?7/o;'i, bullion, lose all the advantage of their 
peculiar character as money, and are dealt with as mere commodi- 
ties. The merchant, who has remittances to make from abroad, 
looks at nothing but the gain to be made on those remittances, and 
treats the precious metals as a commodity he can dispose of with 
more or less benefit. In his eyes, an exchange more or less is no 
object; for it is his business to negotiate exchanges, so as to get a 
profit upon them. An ordinary person might prefer to receive 
money instead of goods, because it is an article, whose value he is 
better acquainted with: but a merchant, who is apprised of the 
prices current in most of the markets of the world, knows how to 
appreciate the value he receives in return, whatever shape it may 
appear under. 

An individual may be under the necessity of liquidating, for the 
purpose of giving a new direction to his capital, or of partition, or the 
like. A nation is never obliged to do so. This liquidation is 
effected with the circulating money of the nation, which it occupies 
only for the time; the same money going almost immediately to 
operate another act of liquidation or of exchange. 

We have seen above (Chap. XV.) that the abundance of specie is 
not even necessary for the national facilitation of exchanges and 
sales; for that buyers really buy with products, — each with his 
respective portion of the products he has concurred in creating: that 
•with this he buys money, which serves but to buy some further pro- 
duct; and that, in this operation, money affords but a temporary 
convenience; like the vehicles employed to convey to market the 
produce of a farm, and to bring back the articles that have been pur- 
chased with the produce. Whatever amount of money may have 
been employed in the purchase or liquidation, it has passed for as 
much as it was taken for: and, at the close of the transaction, the 
individual is neither richer nor poorer. The loss or profit arises out 
of the nature of the transaction itself, and has no reference to the 
medium employed in the course of it. 

In no one way do the causes, that influence individual preference 
of money tocommodities,operateupon international commerce. When 
the nation has a smaller stock than its necessities require, its value 
within the nation is raised, and foreign and native merchants are 
equally interested in the importation of more: when it is redundant, 
its relative value to commodities at large is reduced, and it becomes 
advantageous to export to that spot, where its command of commo- 
dities may be greater than at home. To retain it by compulsory 
measures, is to force individuals to keep what is a burthen to them.* 

* No one but an entire stranger to these matters would here be inclined to 
object, that money can never be burthensome, and is always disposed of easily 
enough. So it may be, indeed, by such as are content to throw its value away 
altogether, or at least, to make a disadvantageous exchange. A confectioner 
may give away his sugar-plums, or eat them himself; but in that case he loses 



158 ON PRODUCTION. book i. 

And here I might, perhaps, now dismiss the subject of the balance 
of trade; but such is the prevailing ignorance on this topic, and so 
novel are the views 1 have been taking, even to persons of the bet- 
ter class, to writers and statesmen of the purest intentions and well 
informed on other points, that it may be worth while to put the 
reader on his guard against some fallacies which are often set up in 
opposition to liberal principles, and are unfortunately the ground- 
work of the prevailing policy of most of the European States. I 
shall uniformly reduce the objections to the simplest terms possible, 
that their weight may be the more easily estimated. 

It is said, that, by increasing the currency through the means of a 
favourable balance of trade, the total capital of a nation is augmented; 
and, on the contrary, by diminishing it, that capital is reduced. But 
it must be always kept in mind, that capital consists, not of so much 
silver or gold, but of the values devoted to reproductive consump- 
tion, which values necessarily assume an infinite variety of success- 
ive forms. When it is intended to vest a given capital in any 
concern, or to place it out at interest, the first step is undoubtedly to 
realise that amount, by converting* into ready money the different 

the value of them. It should be observed, that the abundance of specie is cona- 
patible with national misery; for the money, that goes to buy bread, must have 
been bought itself with other products. And, when production has to contend 
with adverse circumstances, individuals are in great distress for money, not 
because that article is scarce, which oftentimes it is not, but because the creation 
of the products, wherewith it is procurable, can not be effected with advantage. 

* A merchant's ledger for two successive years may show him richer in the' 
end of the second, than at the end of the first, although possessed of a smaller 
amount of specie. Suppose the first year's amount to stand thus : — 

Dollars. 
Ground and buildings - - - - - - - 8000 

Machinery and movables ------ - 4000 

Stock in hand - - - - - - - - 3000 

Balance of good credits ------- 1000 

Cash - - ^ - - - 4000 

Total --..... 20,000 

And the second year's thus: — 

Dollars. 

Ground and buildings ------- 8000 

Machinery and movables ------- 5000 

Stock in hand 6000 

Balance of good credits ------- 2000 

Cash 1000 

Total - - 22,000 

Exhibiting an increase of 2000 dollars, although his cash be reduced to one 
quarter of the former amount. 

A similar account, diifering only in the ratios of the different items, might be 
made out for the whole of the individuals in the community, who would then be 
evidently richer, though possessed of much less specie or cash. 



CHAP. xvii. ON PRODUCTION. 159 

values one has at command. The vahie of the capital, thus assuming 
the transient form of money, is quickly transmuted by one exchange 
after another into buildings, works, and jjerishable substances requi- 
site for the projected enterprise. The ready money employed for 
the occasion passes again into other hands, for the purpose of facili- 
tating fresh exchanges, as soon as it has accomplished its momentary 
duty; in like manner as do many other substances, the shape of 
which this capital successively assumes. So that the value of capi- 
tal is neither lost nor impaired by parting with its value, whatever 
material shape it happens to be under, provided that we part with it 
in a way that ensures its renovation. 

Suppose a French dealer in foreign commodities to consign to a 
foreign country a capital of 10,000 dollars in specie for the purchase 
of cotton; when his cotton arrives, he possesses 20,000 dollars value 
in cotton instead of specie, putting his profit out of the question for 
the moment. Has any body lost this amount of specie ? Certainly 
not: the adventurer* has come honestly by it. A cotton manufac- 
turer gives cash for the cargo; is he the loser of the price ? No, 
surely: on the contrary, the article in his hands will increase to twice 
its value, so as to leave him a profit, after repaying all his advances. 
If no individual capitalist has lost the 20,000 dollars exported, how 
can the nation have lost them ? The loss will fall on the consumer, 
they will tell you: in fact, all the cotton goods bought and consumed 
will be so much positive loss; but the same consumers might have 
consumed linens or woollens of exactly the same value, without one 
dollar of the 20,000 being sent out of the country, and yet there 
would equally be a loss or consumption to that amount of value. 
The loss of value we are now speaking of is not occasioned by the 
export, but by the consumption, which might have taken place without 
any export whatever. I may, therefore, say, with the strictest truth, 
that the export of the specie has caused no loss at all to the nation. 
It has been urged, with much confidence, that, had the export of 
20,000 dollars never been made, France would remain in possession 
of that additional value; in fact, that the nation has lost the amount 
twice over; first, by the act of export; secondly, by that of con- 
sumption: whereas, the consumption of an indigenous product would 
have entailed a single loss only. But I answer as before, that the 
export of specie has occasioned no loss; that it was balanced by 
equivalent value imported; and that it is so certain, that nothing has 
been lost, than the 20,000 dollars worth of imported commodities, 
that I defy any one to point out any other losers than the consumers 
of those commodities. If there has been no loser, it is clear there 
can have been no loss. 

Would you put a stop to the emigration of capital? It is not to 
be prevented by keeping specie in the country. A man resolved to 
transfer his capital elsewhere can do it just as effectually by the con- 
signment of goods, whose export is permitted.* So much the bet- 

* The transfer of capital by bills on foreign countries, comes precisely to the 



160 ON PRODUCTION. book i. 

ter, we may be told; for our manufacturers will benefit by the 
exports. True; but their value exists no longer in the nation, since 
they bring back no return wherewith to make new purchases; there 
has been a transfer of so much capital from amongst you, to give 
activity, not to your own, but to some other nation's industry. This 
is a real ground of apprehension. Capital naturally flows to those 
places that hold out security and lucrative employment, and gradu- 
ally retires from countries oifering no such advantages: but it may 
easily enough retire, without being ever converted into specie. 

If the export of specie causes no diminution of national capital, 
provided it be followed by a corresponding return, on the other 
hand, its import brings no accession of capital. For, in reality, 
before specie can be imported, it must have been purchased by an 
equivalent value exported for that purpose. 

On this point it has been alleged, that by sending abroad goods 
instead of specie, a demand is created for goods, and the producers 
enabled to make a profit upon their production. I answer, that, 
even when specie is sent abroad, that specie must have been first 
obtained by the export of some indigenous product; for, we may 
rest assured, that the foreign owner of it did not give it to the French 
importer for nothing; and France had nothing to ofier in the first 
instance but her domestic products. If the supply of the precious 
metals in the country be more than sufficient for the wants of the 
country, it is a fitter object of export than another commodity; arid, 
if more of the specie be exported than the excess of the supply above 
the demand for the purposes of cii"Culation, we may calculate with 
certainty, that, since the value of specie must have been necessarily 
raised by the exportation, other specie will be imported to replace 
what has been withdrawn; for the purchase of which last, home 
products must have been sent abroad, which will have yielded a 
profit to the home producers. In a word, every value sent out of 
France, for the purchase of foreign returns for the French market, 
may be resolved into a product of domestic industry, given either 
first or last, for France has nothing else to procure them with. 

Again, it has been argued, that it is better to export consumable 
articles, as, for instance, manufactures, and to keep at home those 
products not liable to consumption, or, at least, not to quick con- 
sumption, such as specie. Yet objects of quick consumption, if more 
in demand, are more profitable to keep than objects of slower con- 
sumption. It would often be doing a producer a very poor service, 
to make him substitute a quantity of commodities of slow consump- 
tion for an equal portion of his capital of more rapid consumption. 
If an ironmaster were to contract for the delivery to him of a 
quantity of coal at a day certain, and when the day came the coal 
could not be procurable, and he should be offered the value in money 
in its stead, it would be somewhat difficult to convince him of the 

same thing. It is a mere substitute in the place of the individual making the 
export of commodities, who transfers his right to receive their proceeds, the 
value of which remains abroad. 



CHAP. XVII. ON PEODUCTION. 161 

service done him by the delivery of money; which is an object of 
much slower consumption than the coal he contracted for. Should 
a dyer send an order for dying woods from abroad, it would be a 
positive injury to send him gold, on the plea, that, with equal value, 
it has the advantage of greater durability. He had no occasion for 
a durable article whatever; what he wanted was a substance, which, 
though decomposed in his vats, would quickly re-appear in the 
colours of his stuffs.* 

If it were no advantage to import any but the most durable items 
of productive capital, there are other very durable objects, such as 
stone or iron, that ought to share in our partiality with silver and 
gold. But the point of real importance is, the durability, not of any 
particular substance, but of the value of capital. Now the value of 
capital is perpetuated, notwithstanding the repeated change of the 
material shape in which it is vested. Nay, it cannot yield either 
interest or profit, unless that shape be continually varied. To con- 
fine it to the single shape of money would be to condemn it to re- 
main unproductive. 

But I will go a step further, and, having shown that there is no 
advantage in importing gold and silver more than any other article 
of merchandise, I will assert, that, supposing it were desirable to 
have the balance of trade always in our favour, yet it is morally 
impossible it should be so. 

Gold and silver are like all the other substances that, in the aggre- 
gate, compose national wealth; they are useful to the community no 
longer than while they do not exceed the national demand for them. 
Any such excess must make the sellers more numerous than the 
buyers; consequently must depress the price in proportion, and thus 
create a powerful inducement to buy in the home market, in the 
expectation of making a profit upon the export. This may be 
illustrated by an example. 

Suppose for a moment the internal traffic and national wealth of a 
given country to be such as to require the constant employ of a 
thousand carriages of different kinds. Suppose, too, that, by some 
peculiar system of commerce, we should succeed in getting more 
carriages annually imported, than were annually destroyed by wear 
and tear; so that, at the year's end, there should be 1500 instead of 
iOOO; is it not obvious, that there would be in that case 500 lying 
by in the repositories quite useless, and that the owners of them, 
rather than suffer their value to lie dormant, would undersell each 
other, and even smuggle them abroad if it were jiracticable, in the 
hope of turning them to better account ? In vain would the govern- 

* In Book III., which treats of consumption, it will be seen, that the slower 
kinds of unproductive consumption are preferable to the more rapid ones. But, 
in the reproductive branch, the more rapid are the better; because, the more 
quickly the reproduction is effected, the less charge of interest is incurred, and 
the oftener the same capital can repeat its productive agency. The rapidity of 
consumption, moreover, does not aliect external products in particular; its dis- 
advantages are equal, whether the product be of home or foreign growth. 
21 



162 ON PRODUCTION. book i. 

ment conclude commercial treaties for the encouragement of their 
import: in vain would it expend its efforts in stimulating the export 
of other commodities, for the purpose of getting returns in the 
shape of carriages; the more the public authorities favoured the im- 
port, the more anxious would individuals be to export. 

As it is with carriages, so is it with specie likewise. The de- 
mand is limited; it can form but a part of the aggregate wealth of 
the nation. That wealth can not possibly consist entirely of specie; 
for other things are requisite besides specie. The extent of the de- 
mand for that peculiar article is proportionate to the general wealth; 
in the same manner, as a greater number of carriages is wanted in a 
rich than in a poor country. Whatever brilliant or solid qualities 
the precious metals may possess, their value depends upon the use 
made of them, and that use is limited. Like carriages, they have a 
value peculiar to them; a value that diminishes in proportion to the 
increase of their relative plenty, in comparison with the objects of 
exchange, and increases in proportion to their relative scarcity. 

One is told, that every thing may be procured with gold or silver. 
True; but upon what terms? The terms are less advantageous, when 
these metals are forcibly multiplied beyond the demand; hence their 
strong tendency to emigration under such circumstances. The ex- 
port of silver from Spain was prohibited; yet Spain supplied all 
Europe with it. In 1812, the, paper money of England having 
rendered superfluous all the gold money of that country, and made 
that metal too abundant for its other and remaining uses, its relative 
value fell, and her guineas emigrated to France, in spite of the ease 
with which the coasts of an island may be guarded, and of the de- 
nunciation of capital punishment against the exporters. 

To what good purpose, then, do governments labour to turn the 
balance of commerce in favour of their respective nations? To 
none whatever; unless, perhaps, to exhibit the show of financial 
advantages, unsupported by fact or experience.* How can maxims 
so clear, so agreeable to plain common sense, and to facts attested by 
all who have made commerce their study, have yet been rejected in 
practice by all the ruling powers of Europe,t nay, even have beifen 

* The returns of British commerce from the commencement of the 18th cen- 
tury down to the establishment of the existing paper money of that nation, show 
a regular annual excess, more or less received by Great Britain in the shape of 
specie, amounting altogether to the enormous total of 347 millions sterling 
(more than 1600 millions of dollars.) If to this be added the specie already in 
Great Britain at the outset, England ought to have possessed a circulating me- 
dium of very near 400 millions sterling. How happens it, then, that the most 
exaggerated ministerial calculations have never given a larger total of specie 
than 47 millions, even at the period of its greatest abundance? Vide Supra, 
Chap. III. 

f All of them have acted under the conviction, 1. That the precious metals 
are the only desirable kind of wealth, whereas they perform but a secondary 
part in its production: 2. That they have it in their power to cause their regular 
influx by compulsory measures. The example of England (^Vide note preced- 
ing,) will show the little success of the experiment. The pre-eminent wealth 
of that nation, then, is derived from some other cause than the favourable bal- 



CHAP. XVII. ON PRODUCTION. 163 

attacked by a number of writers, that have evinced both genius and 
information on other subjects? To speak the truth, it is because the 
first principles of political economy are as yet but little known; be- 
cause ingenious systems and reasonings have been built upon hollow 
foundations, and taken advantage of, on the one hand, by interested 
rulers, who employ prohibition as a weapon of offence or an instru- 
ment of revenue; and, on the other, by the personal avarice of mer- 
chants and manufacturers, who have a private interest in exclusive 
measures, and take but little pains to inquire, whether their profits 
arise from actual production, or from a simultaneous loss thrown 
upon other classes of the community. 

A determination to maintain a favourable balance of trade, that is 
to say, to export goods and receive returns of specie, is, in fact, a 
determination to have no foreign trade at all; for the nation, with 
whom the trade is to be carried on, can only give in exchange what 
it has to give. If one party will receive nothing but the precious 
metals, the other party may come to a similar resolution; and, when 
both parties require the same commodity, there is no possibility of 
any exchange. Were it practicable to monopolize the precious 
metals, there are few nations in the world that would not be cut ofi" 
from all hope of mutual commercial relations. If one country afford 
to another what the latter wants in exchange, what more would she 
have? or in what respect would gold be preferable? for what else can 
it be wanted, than as the means of subsequently purchasing the 
objects of desire? 

The day will come, sooner or later, when people will wonder at 
the necessity of taking all this trouble to expose the folly of a 
system, so childish and absurd, and yet so often enforced at the 
point of the bayonet. (1) 

[end of the digression upon the balance of trade.] 

ance of her commerce. But what other cause? Why from the immensity of 
her production. But to what does she owe that immensity? To the frugality 
exerted in the accumulation of individual capital; to the national turn for in- 
dustry and practical application; to the security of person and property, the 
facility of internal circulation, and freedom of individual agency, which, limited 
and fettered as it is, is yet, on the whole, superior to that of the other European 
states. 

(1) In a note, here inserted, in the earlier editions of this work, the American 
editor referred to the laudable exertions made by Mr. Huskisson, with the sup- 
port of Mr. Canning and other then prominent members of the British govern- 
ment, to expose the impolicy and injustice of restrictions and prohibitions on 
commerce, and to the success of some of their measures to relieve the industry 
of the country from the shackles imposed in a less enlightened age. We also 
then quoted the observations of the Edinburgh Review, " that Mr. Huskisson, 
in particular, against whom every species of ribald abuse had been cast, had 
done more to improve the commercial policy of England during the short period 
that he was President of the Board of Trade, than all the mitiisters who had 
preceded him for the last hundred years. And it ought to be remembered to his 
honour, that the measures he suggested, and the odium thence arising, were not 
proposed and incurred by him in the view of serving any party purpose, but solely 



164 ON pkoDUCTION. book i. 

To resume our subject.— We have seen, that the very advantages 
aimed at by the means of a favourable balance of trade, are altogether 
illusory; and that, supposing them real, it is impossible for a nation 
permanently to enjoy them. It remains to be shown, what is the 
actual operation of regulations framed with this object in view. 

By the absolute exclusion of specific manufactures of foreign 
fabric, a government establishes a monopoly in favour of the home 
producers of these articles, and in prejudice of the home consumers; 
that is to say, those classes of the nation which produce them, being 
entitled to their exclusive sale, can raise their prices above the natu- 
ral rate; while the home consumers, being unable to purchase else- 
where, are compelled to pay for them unnaturally dear.* If the 

* Ricardo, in his Essay on the Principles of Political Economy and Taxation, 
published in 1817, has justly remarked on this passage, that a government can 
not, by prohibition, elevate a product beyond its natural rate of price: for in that 
case, the home producers would betake themselves in greater numbers to its pro- 
duction, and, by competition, reduce the profits upon it to the general level. To 
make myself better understood, I must therefore explain, that, by natural rate of 
price, I mean the lowest rate at which a commodity is procurable, whether by 
commerce or other branch of industry. If commercial can procure it cheaper 
than manufacturing industry, and the government take upon itself to compel its 
production by the way of manufacture, it then imposes upon the nation a more 
chargeable mode of procurement. Thus, it wrongs the consumer, without giving 
to the domestic producer a profit, equivalent to the extra charge upon the consu- 
mer; for competition soon brings that profit down to the ordinary level of profit, 
and the monopoly is thereby rendered nugatory. So that, although Ricardo is 
thus far correct in his criticism, he only shows the measure I am reprobating to 
be more mischievous; inasmuch as it augments the natural difficulties in the way 
of the satisfaction of human wants, without any counteracting benefit to any class 
or any individual whatever. 

because he believed, and most justly, that these measures were sound in prin- 
ciple, and calculated to promote the real and lasting interests of his country." 

Since that time all the successive administrations in England, both Tory and 
Whig, have at least uniformly recognized the soundness of the doctrines of free 
trade, and some of theni, by various important commercial enactments, have given 
a still wider application to these beneficial truths; and such, too, has been the 
effect of their liberal measures upon the state of opinion and of legislation 
throughout Great Britain, that both in and out of parliament, a most gratifying 
change has taken place. Commercial questions every where now occupy a 
large share of attention, are discussed with the greatest ability and acuteness in 
almost all the public journals, and must therefore lead to the emancipation of 
commerce from the fetters which have so long and so perniciously bound it. 

In France, however, and other countries, which might be named, the state of 
knowledge, and the state of opinion, are not yet in favour of liberal commercial 
views. " For thirty years," we are told by the English Commissioners, Messrs. 
Villiers and Bowring, " nearly every law passed on Custom House matters had 
been intended either to establish or to consolidate the system of protection and 
prohibition. Under the encouragement of the legislature, much capital has been 
invested in the establishment and extension of protected manufactures, whose 
now tottering and uncertain position (the natural and necessary consequence of 
the system itself) has made their proprietors most feelingly alive to any change 
which might affect them." 

American Editor. 



CHAP. XVII. ON PRODUCTION. 165 

articles be not wholly prohibited, but merely saddled with an import 
duty, the home producer can then increase their price by the whole 
amount of the duty, and the consumer will have to pay the differ- 
ence. For example, if an import duty of 20 cents per dozen be laid 
upon earthenware plates worth 60 cents per' dozen, the importer, 
whatever country he may belong to, must charge the consumer 30 
cents; and the home manufacturer of that commodity is enabled to 
ask 80 cents per dozen of his customers for plates of the same qual- 
ity; which he could not do without the intervention of the duty; 
because the consumer could get the same article for 60 cents: thus, a 
premium to the whole extent of the duty is given to the home 
manufacturer out of the consumer's pocket. 

Should any one maintain, that the advantage of producing at home 
counterbalances the hardship of paying dearer for almost every arti- 
cle; that our own capital and labour are engaged in the production, 
and the profits pocketed by our own fellow citizens; my answer is, 
that the foreign commodities we might import are not to be had 
gratis; that we must purchase them with values of home production, 
which would have given equal employment to our industry and 
capital: for we must never lose sight of this maxim, that products 
are always bought ultimately with products. It is most for our ad- 
vantage to employ our productive powers, not in those branches in 
which foreigners excel us, but in those which we excel in ourselves; 
and with the product to purchase of others. The opposite course 
would be just as absurd, as if a man should wish to make his own 
coats and shoes. What would the world say, if, at the door of every 
house an import duty were laid upon coats and shoes, for the lauda- 
ble purpose of compelling the inmates to make them for themselves? 
Would not people say with justice, let us follow each his own pur- 
suits, and buy what we want with what we produce, or, which comes 
to the same thing, with what we get for our products. The system 
would be precisely the same, only carried to a ridiculous extreme. 

Well may it be a matter of wonder, that every nation should 
manifest such anxiety to obtain prohibitory regulations, if it be true 
that it can pi'ofit nothing by them; and lead one to suppose the two 
cases not parallel, because we do not find individual householders 
solicitous to obtain the same privilege. But the sole difference is 
this, that individuals are independent and consistent beings, actuated 
by no contrariety of will, and more interested in their character of 
consumers of coats and shoes to buy them cheap, than as manufac- 
turers to sell unnaturally dear. 

Who, then, are the classes of the community so importunate for 
prohibitions or heavy import duties? The producers of the par- 
ticular commodity, that applies for protection from competition, not 
the consumers of that commodity. The public interest is their plea; 
but self-interest is evidently their object. Well, but, say these 
gentry, are they not the same thing? are not our gains national gains? 
By no means: whatever profit is acquired in this manner, is so 



166 ON PRODUCTION. booki. 

much taken put of the pockets of a neighbour and fellow citizen: 
and, if the excess of charge thrown upon consumers by the mono- 
poly could be correctly computed, it would be found, that the loss of 
the consumer exceeds the gain of the monopolist. Here, then, 
individual and public interest are in direct opposition to each other; 
and, since public interest is understood by the enlightened few alone, 
is it at all surprising, that the prohibitive system should find so 
many partisans and so few opponents? 

There is in general far too little attention paid to the serious mis- 
chief of raising prices upon the consumers. The evil is not apparent 
to cursory observation, because it operates piecemeal, and is felt in a 
very slight degree on every purchase or act of consumption: but it 
is really most serious, on account of its constant recurrence and 
universal pressure. The whole fortune of every consumer is affect- 
ed by every fluctuation of price in the articles of his consumption; 
the cheaper they are, the richer he is, and vice versa. If a single 
article rise in price, he is so much the more poor in respect of that 
article; if all rise together, he is poorer in respect to the whole. 
And, since the whole nation is comprehended in the class of the 
consumers, the whole nation must in that case be the poorer. Be- 
sides which, it is crippled in the extension of the variety of its en- 
joyments, and prevented from obtaining products whereof it stands 
in need, in exchange for those wherewith it might procure them. 
It is of no use to assert, that, when prices are raised, what one gains 
another loses. For the position is not true, except in the case of 
monopolies; nor even to the full extent with regard to them; for 
the monopolist never profits to the full amount of the loss to the 
consumers. If the rise be occasioned by taxation or import-duty 
under any shape whatever, the producer gains nothing by the in- 
crease of price, but just the reverse, as we shall see by and by (Book 
III. Chapter VII. :) so that, in fact, he is no richer in his capacity of 
producer, though poorer in his quality of consumer. This is one 
of the most effective causes of national impoverishment, or at least 
one of the most powerful checks to the progress of national wealth. 

For this reason, it may be perceived, that it is an absurd distinction 
to view with more jealousy the import of foreign objects of barren 
consumption, than that of raw materials for home manufacture. 
Whether the products consumed be of domestic or of foreign 
growth, a portion of wealth is destroyed in the act of consumption, 
and a proportionate inroad made into the wealth of the community. 
But that inroad is the result of the act of consumption, not of the 
act of dealing with the foreigner; and the resulting stimulus to 
national production, is the same in either case. For, wherewith 
was the purchase of the foreign product made? either with a do- 
mestic product or with money, which must itself have been pro- 
cured with a domestic product. In buying of a foreigner, the nation 
really does no inore than send abroad a domestic product in lieu of 
consuming it at home, and consume in its place the foreign product 
received in exchange. The individual consumer himself, probably, 



CHAP. XVII. ON PRODUCTION. 167 

does not conduct this operation; commerce conducts it for him. 
No one country can buy of another, except with its own domestic 
products. 

In defence of import duties it is often urged, " that when the inte- 
rest of money is lower abroad than at home, the foreign has an ad- 
vantage over the home producer, which must be met by a counter- 
vailing duty." The low rate of interest is, to the foreign producer, 
an advantage, analogous to that of the superior quality of his land. It 
tends to cheapen the products he raises; and it is reasonable enough 
that our domestic consumers should take the benefit of that cheapness. 
The same motive will operate here, that leads us rather to import 
sugar and indigo from tropical climates, than to raise them in our 
own. 

" But capital is necessary in every branch of production: so that 
the foreigner, who can procure it at a lower rate of interest, has the 
the same advantage in respect to every product; and, if the free im- 
portation be permitted, he will have an advantage over all classes of 
home producers." Tell me, then, how his products are to be paid 
for. " Why, in specie, and there lies the mischief." And how is 
the specie to be got to pay for them? " All the nation has, will go 
in that way; and when it is exhausted national misery will be com- 
plete." So then it is admitted, that before arriving at this extremity, 
the constant efflux of specie will gradually render it more scarce at 
home, and more abundant abroad; wherefore, it will gradually rise 
1, 2, 3, per cent higher in value at home than abroad; which is fully 
sufficient to turn the tide, and make specie flow inwards faster than 
it flowed outwards. But it will not do so without some returns; and 
of.what can the returns be made, but of products of the land, or the 
commerce of the nation ? For there is no possible means of pur- 
chasing from foreign nations, otherwise than with the products of 
the national land and commerce; and it is better to buy of them 
what they can produce cheaper than ourselves, because we may rest 
assured, that they must take in payment what we can produce 
cheaper than they. This they must do, else there must be an end of 
all interchange. 

Again, it is affirmed, and what absurd positions have not been 
advanced to involve these questions in obscurity? that, since almost 
all the nation are at the same time consumers and producers, they 
gain by prohibition and monopoly as much in the one capacity as 
they lose in the other; that the producer, who gets a monopoly-pro- 
fit upon the object of his own production, is, on the other hand, the 
sufierer by a similar profit upon the objects of his consumption; and 
thus that the nation is made up of rogues and fools, who are a match for 
each other. It is worth remarking, that every body thinks himself 
more rogue than fool; for, although all are consumers as well as pro- 
ducers, the enormous profits made upon a single article are much 
more striking, than reiterated minute losses upon the numberless 
items of consumption. If an import duty be laid upon calicoes, the 
additional annual charge to each person of moderate fortune, may, 



168 ON PRODUCTION. book i. 

perhaps, not exceed 2i dollars or 3 dollars at most; and probably he 
does not very well comprehend the nature of the loss, or feel it much, 
though repeated in some degree or other upon every thing he con- 
sumes; whereas, possibly, this consumer is himself a manufacturer, 
say a hat-maker; and should a duty be laid upon the import of 
foreign hats, he will immediately see that it will raise the price of 
his own hats, and probably increase his annual profits by several 
thousand dollars. It is this delusion that makes private interest so 
warm an advocate for prohibitory measures, even where the whole 
community loses more by them as consumers, than it gains as 
producers. 

But, even in this point of view, the exclusive system is pregnant 
with injustice. It is impossible that every class of production 
should profit by the exclusive system, supposing it to be universal, 
which, in point of fact, it never is in practice, though possibly it may 
be in law or intention. Some articles can never, from the nature of 
things, be derived from abroad; fresh fish, for instance, or horned 
cattle; as to them, therefore, import duties would be inoperative in 
raising the price. The same may be said of masons and carpenters' 
work, and of the numberless callings necessarily carried on within 
the community; as those of shopmen, clerks, carriers, retail dealers, 
and many others. • The producers of immaterial products, public 
functionaries, and fundholders, lie under the same disability. These 
classes can none of them be invested with a monopoly by means of 
import duties, though they are subjected to the hardship of many 
monopolies granted in that way to other classes of producers.* 

Besides, the profits of monopoly are not equitably divided amongst 
the difierent classes even of those that concur in the productioi\ of 
the commodity, which is the subject of monopoly. If the master- 
adventurers, whether in agriculture, manufacture, or commerce, have 
the consumers at their mercy, their labourers and subordinate pro- 
ductive agents are still more exposed to their extortion, for reasons 
that will be explained in Book 11. So that these latter classes parti- 
cipate in the loss with consumers at large, but get no share of the 
unnatural gains of their superiors. 

Prohibitory measures, besides affecting the pockets of the con- 
sumers, often subject them to severe privations. I am ashamed to 

* There is a sort of malicious satisfaction in the discovery, that those who 
impose these restrictions are usually among the severest sufferers. Sometimes 
they attempt to indemnify themselves by a further act of injustice; the public 
functionaries augment their ovirn salaries, if they have the keeping of the public 
purse. At other times they abolish a monopoly, vi^hen they find it press pecu- 
liarly on themselves. In 1599, the manufacturers of Tours petitioned Henry IV. 
to prohibit the import of gold and silver silk stuffs, vs^hich had previously been 
entirely of foreign fabric. They cajoled the government by the statement, that 
they could furnish the whole consumption of France with that article. The king 
granted their request, with his characteristic facility; but the consumers, who 
were chiefly the courtiers and people of condition, were loud in their remon- 
strances at the consequent advance of price; and the edict was revoked in six 
months. Memoires de Sully, liv. ii. 



CHAP. XVII. ON PRODUCTION. 169 

say, that, within these few years, we have had the hat-makers of 
Marseilles petitioning for the prohibition of the import of foreign 
straw or chip hats, on the plea that they injured the sale of their own 
felt hats;* a measure thaf, would have deprived the country people 
and labourers in husbandry, who are so much exposed to the sun, of a 
light, a cool, and cheap covering, admirably adapted to their wants, 
the use of which it was highly desirable to extend and encourage. 

In pursuit of what it mistakes for profound policy, or to gratify 
feelings it supposes to be laudable, a government will sometimes pro- 
hibit or divert the course of a particular trade, and thereby do irre- 
parable mischief to the productive powers of the nation. When 
Philip II. became master of Portugal, and forbade all intercourse 
between his new subjects and the Dutch, whom he detested, what 
was the consequence ? The Dutch, who before resorted to Lisbon 
for the manufactures of India, of which they took off an immense 
quantity, finding this avenue closed against their industry, went 
straight to India for what they wanted, and, in the end, drove out 
the Portuguese from that quarter; and, what was meant as the deadly 
blow of inveterate hatred, turned out the main source of their aggran- 
dizement. " Commerce," says Fenelon, " is like the native springs 
of the rock, wliich often cease to flow altogether, if it be attempted 
to alter their course."! ^ 

Such are the principal evils of impediments thrown in the way of 
import, which are carried to the extreme point by absolute prohibi- 
tion. There have, indeed, been instances of nations that have thriven 
under such a system; but then it was, because the causes of national 
prosperity were more powerful than the causes of national impover- 
ishment. Nations resemble the human frame, which contains a vital 
principle, that incessantly labours to repair the inroads of excess and 
dissipation upon its health and constitution. Nature is active in 
closing -the wounds and healing the bruises inflicted by our own awk- 
wardness and intemperance. In like manner, states maintain them- 
selves, nay, often increase in prosperity, in spite of the infinite inju- 
ries of every description, which friends as well as enemies inflict 
upon them. And it is worth remarking, that the most industrious 
nations are those, which are the most subjected to such outrage, 
because none others could survive them. The cry is then ' our sys- 
tem must be the true one, for the national prosperity is advancing.' 
Whereas, were we to take an enlarged view of the circumstances, 
that, for the last three centuries, have combined to develope the power 
and faculties of man; to survey with the eye of intelligence the pro- 

* Bulletin de la Societe df Encouragement pour V Industrie Nationale, No. 4. 

•f The national convention of France prohibited the import of raw hides from 
Spain, on the plea that they injured the trade in those of France; not observing, 
that the self-same hides v?ent back to Spain in a tanned state. The tanneries of 
France being obliged to procure the raw article at too dear a rate, were quickly 
abandoned; and the manufacture was transferred to Spain, along with great part 
of the capital, and many of the hands employed. It is next to impossible tor a 
government, not only to do any good to national production by its interference, 
but even to help doing mischief. 
22 



170 ON PRODUCTION. book i. 

gress of navigation and discovery, of invention in every branch of 
art and science; to take account of the variety of useful animals and 
vegetables that have been transplanted from one hemisphere to the 
other, and to give a due attention to the vast augmentation and 
increased scope both of science and of its practical applications, that 
we are daily witnesses of, we could not resist the conviction, that our 
actual prosperity is nothing to what it might have been; that it is 
engaged in a perpetual struggle against the obstacles and impedi- 
ments thrown into its way; and that, even in those parts of the 
world where mankind is deemed the most enlightened, a great part 
of their time and exertions are occupied in destroying instead of 
multiplying their resources, in despoiling instead of assisting each 
other; and all for want of correct knowledge and information 
respecting their real interests.* 

But, to return to the subject, we have just been examining the 
nature of the injury that a community suffers by difficulties thrown 
in the way of the introduction of foreign commodities. The mis- 
chief occasioned to the country that^jroduces the prohibited article, 
is of the same kind and description; it is prevented from turning its 
capital and industry to the best account. But it is not to be sup- 
posed that the foreign nation can by this means be utterly ruined 
and stripped of all resource, as Napoleon seemed to imagine, when 
he excluded the products of Britain from the markets of the conti- 
nent. To say nothing of the impossibility of effecting a complete 
and actual blockade of a whole country, opposed as it must be by the 
universal motive of self-interest, the utmost effect of it can only be 
to drive its production into a different channel. A nation is always 
competent to the purchase and consumption of the whole of its own 
products, for products are always bought with other products. Do 
you think it possible to prevent England from producing value to 
the amount of a million, by preventing her export of woollens to that 
amount ? You are much mistaken if you do. England will employ 
the same capital and the same manual labour in the preparation of 
ardent spirits, by the distillation of grain or other domestic products, 
that were before occupied in the manufacture of woollens for the 
French market, and she will then no longer bring her woollens to 
be bartered for French brandies. A country, in one way or other, 
direct or indirect, always consumes the values it produces, and can 
consume nothing more. If it cannot exchange its products with its 
neighbours, it is compelled to produce values of such kinds only as 
it can consume at home. This is the utmost effect of prohibitions; 
both parties are worse provided, and neither is at all the richer. 

* It is not my design to insinuate by this, that it is desirable that all minds 
should be imbued with all kinds of knowledge; but that every one shoud have 
just and correct notions of that, in which he is more immediately concerned. 
Nor is the general and complete diffusion of information requisite for the benefi- 
cial ends of science. The good resulting from it is proportionate to the extent of 
its progress: and the welfare of nations differs in degree, according to the correct- 
ness of their ideas upon those points, which most intimately concern them re- 
spectively. 



CHAP. XVII. ON PRODUCTION. ]71 

Napoleon, doubtless, occasioned much injury, both to England 
and to the continent, by cramping their mutual relations of com- 
merce as far as he possibly could. But, on the other hand, he did 
the continent of Europe the involuntary service of facilitating the 
communication between its different parts, by the universality of 
dominion, Avhich his ambition had well nigh achieved. The frontier 
duties between Holland, Belgium, part of Germany, Italy, and 
France, were demolished; and those of the other powers, »vith the 
exception of England, were far from oppressive. We may form 
some estimate of the benefit thence resulting to commerce, from the 
discontent and stagnation that have ensued upon the establishment 
of the present system of lining the frontier of each state with a 
triple guard of douaniers. All the continental states so guarded 
have, indeed, preserved their former means of production; but that 
production has been made less advantageous. 

It can not be denied, that France has gained prodigiously by the 
suppression of the provincial barriers and custom-houses, consequent 
upon her political revolution. Europe had, in like manner, gained 
by the partial removal of the international barriers between its dif- 
ferent political states; and the world at large would derive similar 
benefit from the demolition of those, which insulate, as it were, the 
various communities, into which the human race is divided. 

I have omitted to mention other very serious evils of the exclu- 
sive system; as, for instance, the creation of a new class of crime, 
that of smuggling; whereby an action, wholly innocent in itself, is 
made legally criminal: and persons, who are actually labouring for 
the general welfare, are subjected to punishment. 

Smith admits of two circumstances, that, in his opinion, will 
justify a government in resorting to import-duties: — 1. When a par- 
ticular branch of industry is necessary to the public security, and 
the external supply can not be safely reckoned upon. On this ac- 
count a government may very wisely prohibit the import of gun 
powder, if such prohibition be necessary to set the powder-mills at 
home in activity; for it is better to pay somewhat dear for so essen- 
tial an article, than to run the risk of being unprovided in the hour 
of need.* 2. Where a similar commodity of home produce is 
already saddled with a duty. The foreign article, if wholly exempt 
from duty, would in this case have an actual privilege; so that a 
duty imposed has not the efiect of destroying, but of restoring the 
natural equilibrium and relative position of the different branches of 
production. 

Indeed, it is impossible to find any reasonable ground for exempt- 
ing the production of values by the channel of external commerce 
from the same pressure of taxation that weighs upon the production 
effected in those of agriculture and manufacture. Taxation is, doubt- 

* There is no great weight in this plea of justification. For experience has 
shown, that saltpetre is stored against the moment of need, in the largest quan- 
tity, when it is most an article of habitual import. Yet the legislature of France 
has saddled it with duties amounting to prohibition. 



172 ON PRODUCTION. book i. 

less, an evil, and one which should be reduced to the lowest possible 
degree; but when once a given amount of taxation is admitted to be 
necessary, it is but common justice to lay it equally on all three 
branches of industry. The error I wish to expose to reprobation is 
the notion that taxes of this kind are favourable to production. A 
tax can never be favourable to the public welfare, except by the 
good use that is made of its proceeds. 

These, points should never be lost sight of in the framing of com- 
mercial- treaties, which are really good for nothing but to protect 
industry and capital, diverted into improper channels by the blun- 
ders of legislation. These it would be far wiser to remedy than to 
perpetuate. The healthy state of industry and wealth is the state of 
absolute liberty, in which each interest is left to take care of itself. 
The only useful protection authority can afford them is that against 
fraud or violence. Taxes and restrictive measures never can be a 
benefit: they are at the best a necessary evil; to suppose them use- 
ful to the subjects at large, is to mistake the foundation of national 
prosperity, and to set at naught the principles of political economy. 

Import duties and prohibitions have often been resorted to as a 
means of retaliation: "Your government throws impediments in 
the way of the introduction of our national products: are not we, 
then, justified in equally impeding the introduction of yours?" 
This is the favourite plea, and the basis of most commercial treaties; 
but people mistake their object: granting that nations have a right 
to do one another as much mischief as possible, which, by the way, I 
can hardly admit; I am not here disputing their rights, but discuss- 
ing their interests. 

Undoubtedly, a nation that excludes you from all commercial 
intercourse with her, does you an injury; — robs you, as far as in her 
lies, of the benefits of external commerce; if, therefore, by the dread 
of retaliation, you can induce her to abandon her exclusive measures, 
there is no question about the expediency of such retaliation, as a 
matter of mere policy. But it must not be forgotten that retaliation 
hurts yourself as well as your rival; that it operates, not defensively 
against her selfish measures, but offensively against yourself, in the 
first instance, for the purpose of indirectly attacking her. The only 
point in question is this, what degree of vengeance you are animated 
by, and how much you will consent to throw away upon its gratifi- 
cation.* I will not undertake to enumerate all the evils arising from 
treaties of commerce, or to apply the principles enforced throughout 

* The transatlantic colonies, tliat have, within these few years thrown off 
their colonial dependence, amongst others, the provinces of La Plata, and St. 
Domingo or Haiti, have opened their ports to foreigners, without any demand of 
reciprocity, and are more rich and prosperous than they ever were under the 
operation of the exclusive system. We are told that the trade and prosperity of 
Cuba have doubled since its ports have been opened to the flags of all nations, 
by a concurrence of imperious circumstances, and in violation of the system of 
the mother-country. The elder states of Europe go on like wrong-headed 
farmers, in a bigoted attachment to their old prejudices and methods, while they 
have examples of the good effects of an improved system all around them. 



CHAP. XVII. ON PRODUCTION. 1 73 

this work to all the clauses and provisions usually contained in them. 
I will confine myself to the remark, that almost every modern treaty 
of commerce has had for its basis the imaginary advantage and pos- 
sibility of the liquidation of a favourable balance of trade by an 
import of specie. If these turn out to be chimerical, whatever 
advantage may have resulted from such treaties must be wholly 
referred to the additional freedom and facility of international com- 
munication obtained by them, and not at all to their restrictive 
causes or provisoes, unless either of the contracting parties have 
availed itself of its superior power, to exact conditions savouring of 
a tributary character; as England has done in relation to Portugal. 
In such case, it is mere exaction and spoliation.(l) 

(1) Mr. Villiers and Dr. Bowring, in their very valuable report on the commer- 
cial relations between France and Great Britain, presented to both Houses of Par- 
liament, during the present year, (1834,) in remarking upon the disappointments 
which had been experienced from treaties of commerce between France and 
Great Britain, point out the true causes of the failure of these arrangements, 
however usefully they were intended; and as it is of importance in other coun- 
tries to guard against a recurrence to similar experiments which might present a 
formidable barrier against any permanent or solid change to a more liberal inter- 
national intercourse, we cannot do better, in this place, than to copy their excel- 
lent observations on this head. 

" These arrangements, however usefully intended, were productive of so much 
inconvenience and suffering from the sudden shifting of capital, as to induce an 
unwillingness to await patiently for their ultimate but somewhat remote advan- 
tages. Every treaty of commercial change must, it is certain, affect some interest 
or other, and by these treaties, particularly the treaty of 1786, so many interests 
were suddenly and severely affected, that they were enabled, by combining 
together, to overthrow all the expectations of future good which would have 
inevitably followed the removal of restrictions and prohibitions." 

" It may also be observed, that treaties of commerce are generally agreements 
for mutual preferences; and in so far, are encroachments upon sound commercial 
principles. They are intended to benefit the contracting parties by common 
intercourse, to the exclusion (and consequently to the detriment) of other nations. 
They ordinarily propose exclusive advantages, which, if they open some chan- 
nels of commercial profit, necessarily close others, and prevent the negotiating 
nations from availing themselves of the improvements or accommodating them- 
selves to the changes which the fluctuations of agriculture, manufacUires, or 
trade demand. The Methuen treaty, for example, bound Great Britain to take 
the produce of a particular country at diminished duties, whatever superior ad- 
vantages any other country might chance to offer, while Portugal was, at the 
same time, compelled to receive the manufactures of England, whether or not she 
might have supplied herself more profitably elsewhere. A treaty, therefore, with 
France, proffering reciprocal advantages, that is to say, giving to France peculiar 
privileges in the English market, or obtaining peculiar privileges for England in 
the markets of France, did not appear to offer any prospect of permanent utility; but, 
if it were possible that each country should, for itself, and, with a special view to 
its own interests, remove those impediments to intercourse which had grown out of 
hostile feelings or erroneous calculations, and by comparing the facts which each 
government was enabled to furnish for the elucidation of the inquiry, each should 
find that it could safely and judiciously prepare for more extended transactions; 
if, in a word, it could be shown that each possessed sources of wealth which 
might be made productive to the other, while they lost nothing of their produc- 
tiveness to the nation that possessed them, we believed that, in selecting such 
topics for our examination, and such objects for their result, we were best dis- 
charging the duty which had devolved on us." American Editok. 



174 ON PRODUCTION. book i. 

Again, I would observe, that the offer of peculiar advantages by 
one nation to another, in the way of a treaty of commerce, if not an 
act of hostility, is at least one of extreme odium in the eyes of other 
nations. For the concession to one can only be rendered effectual 
by refusal to others. Hence the germ of discord and of war, with 
all its mischiefs. It is infinitely more simple, and I hope to have 
shown, more profitable also, to treat all nations as friends, and 
impose no higher duties on the introduction of their products, than 
what are necessary to place them on the same footing as those of 
domestic growth. 

Yet, notwithstanding all the mischiefs resulting from the exclusion 
of foreign products, which I have been depicting, it would be an act 
of unquestionable rashness suddenly to change even so ruinous a 
policy. Disease is not to be eradicated in a moment; it requires 
nursing and management to dispense even national benefits. Mono- 
polies are an abuse, but an abuse in which enormous capital is vested, 
and numberless industrious agents employed, which deserve to be 
treated with consideration; for this mass of capital and industry can 
not all at once find a more advantageous channel of national produc- 
tion. Perhaps the cure of all the partial distresses that must follow 
the downfall of that colossal monster in politics, the exclusive system, 
would be as much as the talent of any single statesman could accom- 
plish; yet when one considers calmly the wrongs it entails when it 
is established, and the distresses consequent upon its overthrow, we 
are insensibly led to the reflection, that, if it be so difficult to set 
shackled industry at liberty again, with what caution ought we not 
to receive any proposition for enslaving her. 

But governments have not been content with checking the import 
of foreign products. In the firm conviction, that national prosperity 
consists in selling without buying, and blind to the utter impossibili- 
ty of the thing, they have gone beyond the mere imposition of a tax 
or fine upon purchasing of foreigners, and have in many instances 
offered rewards in the shape of bounties for selling to them. 

This expedient has been employed to an extraordinary degree by 
the British government, which until recently always evinced the 
greatest anxiety to enlarge the market for British commercial and 
manufactured produce.* It is obvious, that a merchant, who 

* The political circumstances of England, during the late war, and her prac- 
tice of supporting and subsidizing military operations on the continent, furnished 
her with a more plausible excuse for attempting to export, in the shape of manu- 
factured produce, those values, which she thus expended without return. But 
she had no need to be at any expense for that purpose. Had England charged 
a seignorage upon the coinage of gold and silver, as she ought to have done, she 
needed not to have given herself any trouble about the form of the values she 
exported to meet her foreign subsidies and expenditure: guineas would them- 
selves have been an object of manufacture. (a) 



(a) So they were without the imposition of a seignorage, which, however, 
should have been charged. But England had no occasion to give bounties with 
a view to facilitate her foreign expenditure. The discount of her bills was a 



CHAP. XVII. ON PRODUCTION. 175 

receives a bounty upon export, can, without personal loss, afford to 
sell his goods in a foreign market at a lower rate than prime cost. 
In the pithy language of Smith, " We can not foixc foreigners to buy 
the goods of our own workmen, as we may our own countrymen; 
the next best expedient, it has been thought, therefore, is to pay them 
for buying." , 

In fact, if a particular commodity, by the time it has reached' the 
French mai'ket, costs the English exporter 20 dollars, his trouble, 
&c. included, and the same commodity could be bought in France 
at the same or a less rate, there is nothing to give him exclusive 
possession of the market. But if the British government pays a 
bounty of 2 dollars upon the export, and thereby enables him to 
lower his demand from 20 to 18 dollars, he may safely reckon upon 
a preference. Yet what is this but a free gift of two dollars from 
the British government to the French consumer? It may be con- 
ceived, that the merchant has no objection to this mode of dealing; 
for his profits are the same as if the French consumer paid the full 
value, or cost price, of the commodity. The British nation is the 
loser in this transaction, in the ratio of 10 per cent upon the French 
consumption; and France remits in return a value of but 18 for 
what has cost 20 dollars. 

When a bounty is paid, not at the moment of. export, but at the 
commencement of productive creation, the home consumer partici- 
pates with the foreigner in the advantage of the bounty; for, in that 
case, the article can be sold below cost price in the home as well as 
in the foreign market. And if, as is sometimes the case, the pro- 
ducer pockets the bounty, and yet keeps up the price of the com- 
modity, the bounty is then a present of the government to the pro- 
ducer, over and above the ordinary profits of his industry. 

When, by the means of a bounty, a product is raised either for 
home or foreign consumption, which would not have been raised 
without one, the effect is, an injurious production, one that costs 
more than it is worth. Suppose an article, when completely finished 
off, to be saleable for 5 dollars and no more, but its prime cost, in- 
cluding of course the profits of productive industry, to amount to 6 
dollars, it is quite clear that nobody will yolunteer the production, 
for fear of a loss of 1 dollar. But, if the government, with a view 
to encourage this branch of industry, be willing to defray this loss — 
in other words, if it offer a bounty of 1 dollar to the producer, the 
production can then go on, and the public revenue, that is to say, the 
nation at large, will be a loser of 1 dollar. And this is precisely 
the kind of advantage that a nation gains by encouraging a branch 

sufficient premium to the manufacturer; and, where that expenditure was large, 
greatly exceeded either drawbacks or bounties. Had specie been directly pro- 
curable, perhaps it might have saved something to the government, in the re- 
duced profit payable to the merchants upon a mere complex opferation. But the 
merchants must have made their profit upon bullion. The sole difference occa- 
sioned by the absurdity of gratuitous coinage was, the expense incurred in that 
coinage; but the imposition of a seignorage would neither have promoted the 
import of bullion, nor facilitated its transport to the scene of expenditure. T. 



176 ON PRODUCTION. book i. 

of production which cannot support itself: it is in fact urging the 
prosecution of a losing concern, the produce of which is exchanged, 
not for other produce, but for the bounty given by the state. 

Wherever there is any thing to be made by a particular employ- 
ment of industry, it wants no encouragement; where there is no- 
thing to be made, it deserves none. There is no truth in the argu- 
ment, that perhaps the state may gain, though individuals can not; 
for how can the state gain, except through the medium of individuals? 
Perhaps it may be said, that the state receives more in duties than 
it pays in bounties; but suppose it does, it merely receives with one 
hand and pays with the other: let the duties be lowered to the whole 
amount of the bounty, and production will stand precisely where it 
did before, with this difference in its favour, viz. that the state will 
save the whole charge of management of the bounties, and part of 
that of the duties. 

Though bounties are chargeable, and a dead loss to the gross 
national wealth, there are cases in which it is politic to incur that 
loss;(l) as when a particular product is necessary to public security, 
and must be had at any rate, however extravagant. Louis XIV., 
with a view to restore the marine of France, granted a bounty of 1 
dollar per ton upon every ship fitted out in France. His object was 
to train up sailors. So likewise when the bounty is the mere re- 
funding of a duty previously exacted. The bounty paid by Great 
Britain upon the export of refined sugar is nothing more than the 
reimbursement of the import duties upon muscovado and molasses. 

Perhaps, too, it may be wise in a government to grant a premium 
on a particular product, which, though it make a loss in the outset, 
holds out a fair prospect of profit in a few year's time. Smith 
thinks otherwise: hear what he says on the subject. "No regula- 
tion of commerce can increase the quantity of industry in any 
society, beyond what its capital can maintain. It can only divert a 
part of it into a direction, into which it might not otherwise have 
gone; and it is by no means certain, that this artificial direction is 
likely to be more advantageous to the society, than that into which 
it would have gone of its own accord. The statesman, who should 
attempt to direct private people in what manner they ought to em- 
ploy their capitals, would not only load himself with a most unne- 
cessary attention, but assume an authority, which could safely be 

(1) We already have had occasion to remark (note 1, page 108) that there can 
be few or no cases in which it would ever be politic to incur a loss by the pay- 
ment of bounties, even with the expectation of insuring the production of objects 
necessary to the public safety. For the end aimed at never can be attained by 
such means. The naval preponderance of England, as we before observed, was 
not owing to any act of parliament, but can satisfactorily be traced to those 
causes we have mentioned in the note referred to. Holland, besides, rose to the 
highest point of European maritime power, without any navigation laws, or 
bounties to her shipping; and France, it must be remembered, notwithstanding 
the famous Ordonnance in 1664, of Louis XIV, "to engage builders and mer- 
chants to construct French vessels," never obtained the so much desired supe- 
riority in ships and in seamen. 

American Editor. 



CHAP. XVII. ON PRODUCTION. 177 

trusted, n^ only to no single person, but to no council or senate 
whatever; and which would no where be so dangerous, as in the 
hands of a man who had folly and presumption enough to fancy 
himself fit to exercise it. Though for want of such regulations, the 
society should never acquire the proposed manufacture, it would not 
upon that account necessarily be the poorer in any one period of its 
duration. In every period of its duration, its whole capital and in- 
dustry might still have been employed, though upon different ob- 
jects, in the manner that was most advantageous at the time."* 

And Smith is certainly right in the main; though perhaps there 
are circumstances that may form exceptions to the general rule, that 
every one is the best judge how to employ his industry and capital. 
Smith wrote at a period and in a country, where personal interest is 
well understood, and where any profitable mode of investing capital 
and industry is not likely to be long overlooked. But every nation 
is not so far advanced in intelligence. How many countries are 
there, where many of the best employments of capital are altogether 
excluded by prejudices that the government alone can remove? 
How many cities and provinces, where certain established invest- 
ments of capital have prevailed from time immemorial? In one 
place, every body invests in landed property, in another, in houses, 
and in others still, in public offices or national funds. Every unusual 
application of the power of capital is, in such places, contemplated 
with distrust or disdain; so that partiality shown to a profitable mode 
of employing industry or capital may possibly be productive of 
national advantage. 

Moreover, a new channel of industry may ruin an unsupported 
speculator, though capable of yielding enormous profit, when the 
labourers shall have acquired practice, and the novelty has once been 
overcome. France at present contains the most beautiful manufac- 
tures of silk and of woollen in the world, and is probably indebted 
for them to the wise encouragement of Colbert's administration. 
He advanced to the manufacturers 2000 yV. for every loom at work; 
and, by the way, this species of encouragement has a very peculiar 
advantage. In ordinary cases, whatever the government levies upon 
the product of individual exertion is wholly lost to future produc- 
tion; but, in this instance, a part was employed in reproduction; a 
portion of individual revenues was thrown into the aggregate pro- 
ductive capital of the nation. This was a degree of wisdom one 
could hardly have expected, even from personal self-interest.t(l) 

* Wealth of Nations, book iv. c. 2. 

I I am far from equally approving all the encouragements of this kind held 
out by this minister; particularly the sums lavished on several establishments of 
pure ostentation, which, like that of the Gobelin tapestry, have constantly cost 
more than they have produced. 

(1) Our author, here, has permitted, although with some slight qualilication, 
an observation to escape from his pen, in direct contradiction with his own gene- 
ral principles, and which, therefore, it is necessary to point out and refute. 
"France," he remarks, in speaking of her manufactures of silk and woollen," is 
23 



178 ON PRODUCTION. book i. 

It would be out of place here to inquire, how wide afield boun- 
ties open to peculation, partiality, and the whole tribe oHibuses inci- 
dent to the management of public affairs. The most enlightened 

probably indebted for them to the wise encouragement of Colbert's administra- 
tion." What is this but admitting that' beneficial consequences to manufactures 
necessarily flow from a protecting system? Now, this we deny, and, in support 
of this denial, fortunately can at present invoke the highest authority. In the 
report on the commercial relations between France and Great Britain, which we 
cannot too often refer to in support of sound principles, Mr. Villiers and Dr. 
Bowrintr, both on this point, and regarding the merits and character of Colbert's 
administration, supply us with the following admirable strictures, which we 
have great satisfaction in presenting to our readers. They will be found to con- 
tain a complete answer to the gratuitous assumption of M. Say, of the wisdom 
herein displayed by Colbert " by this species of encouragement" to manu- 
factures. 

"France thus became the country which adopted and still exhibits the conse- 
quences of a protecting system on a large scale. Its introduction may be traced, 
or rather its extension as far as possible, to Colbert, a minister to whose name 
and administration a great portion of applause has been given, but whose system 
of encouragement was based on a complete ignorance of the true principles of 
commercial legislation. How small an amount of manufacturing prosperity 
Colbert produced, and how great an amount of agricultural, commercial, and 
manufacturing wealth he either destroyed or checked in its natural progress, will 
be obvious to any observer who looks at the immense natural resources and the 
active intelligence of France. It may be safely asserted, that the whole of the 
bounties by which he induced adventurers to enter into remote speculations, as 
well as the excessive duties which he imposed on cheaper foreign articles, were 
almost uncompensated sacrifices; while, on the other hand, of the manufactures 
which he transplanted into France, and which he protected by the exclusion of 
rival productions, scarcely one took permanent root; and of those which still 
exist, and which he intended to support, there is perhaps none which would not 
have been more prosperous and extensive, but for those regulations with which 
his zeal encumbered the early march of manufacturing industry. The popularity 
in France of Colbert's commercial legislation, and the erroneous deductions 
drawn from the consequences of his interference, have produced a most prejudi- 
cial effect on the minds of a large portion of the French public. Colbert's sys- 
tem was a vain attempt to force capital in new directions. Thus, in order to 
compel the establishment of a trade with the West Indies, he made the French 
people pay a premium of thirty francs upon every ton of goods exported, and of 
fifty francs for svery ton of goods imported, independently of other encourage- 
ments. In the same spirit, he incited manufacturing settlers, by large rewards, to 
establish themselves in different parts of France, and boasted of his having set 
up more than 40,000 looms, whose produce was protected by legal enactments; 
and no one was found to estimate the counterbalance of loss, while the most flat- 
tering pictures were drawn of enormous gain. He began in miscalculation; he 
brought the most despotic interference to support his errors; and, if their conse- 
quences be faithfully traced, they will be found little creditable to his own saga- 
city, while greatly ruinous to the nation for whose benefit they were intended. 
The French Revolution broke down many of the absurd and pernicious regula- 
tions which Colbert had introduced, but the vestiges of others remain; and 
although they have become habitual, they interfere with improvement, and give 
superiority to countries where the action of industry and capital is unfettered." 
" Having stated thus much, it would be unjust to withhold from Colbert the 
credit to which he is entitled for the admirable order he established in the 
finances, the efforts which he made to improve, in many particulars, the system 
of taxation, and his opposition to the inconsiderate plan of funding adopt- 
ed by Louvois. The commercial and maritime legislation of France owes to him 



CHAP. XVII. ON PRODUCTION. 



cfil 



statesman is often obliged to abandon a scheme of evi 
utility, by the unavoidable defects and abuses in the 
Among these, one of the most frequent and prominent is 
paying a premium, or granting a favour to the pretens ^ 
merit, but of importunity. In other respects, I have no fault to find 
with the honours, or even pecuniary rewards publicly given to 
artists or mechanics, in recompense of some extraordinary achieve- 
ment of genius or address. Rewards of this kind excite emulation, 
and enlarge the stock of general knowledge, without diverting in- 
dustry or capital from their most beneficial channels. Besides, they 
cost nothing in comparison of bounties of another description. The 
bounty on the export of wheat has, by Smith's account, cost England 
in some years as much as a million and a half of dollars. I do not 
believe that the British or any other government ever spent the 
fiftieth part of that sum upon agriculture in any one year. 



Section II. 

Of the Effect of Regulations fixing the Manner of Production. 

The interference of the public authority, with regard to the details 
of agricultural production, has generally been of a beneficial kind. 
The impossibility of intermeddling in the minute and various details 
of agriculture, the vast number of agents it occupies, often widely 
separated in locality and pursuits, from the largest farming concerns 
to the little garden of the cottager, the small value of the produce in 
comparison with its volume, are so many obstacles that nature has 
placed in the way of authoritative restraint and interference. All 
governments, that have pretended to the least regard for the public 

the corapilatioa of the ordonnance of 1681, a body of maritime law unrivalled to 
this moment." 

As there is, also, another error, in the same paragraph, we must be allowed 
briefly to notice it. By advancing to the manufacturers 2000 francs for every 
loom at work, our author thinks Colbert displayed a degree of wisdom hardly to 
be expected, inasmuch, as in this instance, " a part of the advance would be 
employed in reproduction," whereas, according to him, " in ordinary cases' what- 
ever the government levies upon the products of individual exertion is wholly 
lost to future production." Now, nothing can be more clear, than that the tax 
levied, for the payment of this advance, is a pure loss to the tax-paying people, 
and with this peculiar aggravation, that a large class of the tax-payers are not 
even the consumers of the "encouraged" product. Nor is it exactly true, that in 
" ordinary cases whatever the government levies is wholly lost to future produc- 
tion," for whether the tax be advanced for every loom at work, or for the work of 
the looms themselves, is precisely the same thing; and, as to the destination of 
the tax, a portion of it is quite as likely to be employed in reproduction in the 
latter as in the former case. Finally, where the tax is simply an "encourage- 
ment" to the products, the amount of it will be limited by the effective demand 
for them, whereas, when the advance is made for every loom at work, there is no 
such limit to a useless tax. 

American Editor. 



l^fo ON PRODUCTION. book i. 

welfare, have consequently confined themselves to the granting of 
premiums and encouragements, and to the diffusion of knowledge 
which has often contributed largely to the progress of this art. The 
veterinary college of Alfort, the experimental farm of Ramboullet, 
the introduction of the Merino breed, are real benefits to the agri- 
culture of France, the enlargement and perfection of which she owes 
to the providence of the different rulers that her political troubles 
have successively brought into power. 

A national administration that guards with vigilance the facility 
of communication and the quiet prosecution of the labours of hus- 
bandry, or punishes acts of culpable negligence, as the destroying of 
caterpillars^ and other noxious insects, does a service analogous to 
the preservation of civil order and of property, without which pro- 
duction must cease altogether. 

The regulations relative to the felling of trees in France, however 
indispensable for the preservation of their growth, at least in many 
of their provisions, appear in others rather to operate as a discourage- 
ment of that branch of cultivation, which, though particularly adapted 
to certain soils and sites, and conducive to the attraction of atmo- 
spheric moisture, yet seems to be daily on the decline. 

But there is no branch of industry that has suffered so much from 
the officious interference of authority in its details, as that of manu- 
facture. 

Much of that interference has been directed towards limiting the 
number of producers, either by confining them to one trade exclu- 
sivelj?^, or by exacting specific terms, on which they shall carry on 
their business. This system gave rise to the establishment of char- 
tered companies and incorporated trades. The effect is always the 
same, whatever be the means employed. An exclusive privilege, a 
species of monopoly, is created, which the consumer pays for, and of 
which the privileged persons derive all the benefit. The monopo- 
lists can prosecute their plans of self-interest with so much the more 
ease and concert, because they have legal meetings and a regular 
organization. At such meetings, the prosperity of the corporation 
is mistaken for that of commerce and of the nation at large; and the 
last thing considered is, whether the proposed advantages be the 
result of actual new production, or merely a transfer from one pocket 
to another from the consumers to the privileged producers. This 
is the true reason why those engaged in any particular branch of 
trade are so anxious to have themselves made the subject of regula- 

* Under the old regime of the canton of Berne, every proprietor of land was 
required to furnish, in the proper season of the year, so many bushels of cock- 
chafers, in proportion to the extent of his property. The rich landholders were 
in the habit of buying their contingents from the poorest sort of people, who 
made it their business to collect them, and did it so effectually, that the district 
was ultimately cleared of them. But the extreme difficulty, that even the most 
provident government jneets with in doing good by its interference in the busi- 
ness of production, may be judged of by a fact of which 1 am credibly assured, 
viz. that this act of paternal care gave rise to the singular fraud of transporting 
these insects in sacs from the Savoy side of the Lehman lake into the Pays de 
Vaud. 



CHAP. XVII. ON PRODUCTION. 181 

tion; and the public authorities are commonly, on their part, very- 
ready to indulge them in what offers so fi\ir an opportunity of rais- 
ing a revenue. 

Moreover, arbitrary regulations are extremely flattering to the 
vanity of men in power, as giving them an air of wisdom and fore- 
sight, and confirming their authority, which seems to derive addi- 
tional importance from the frequency of its exercise. There is, per- 
haps, at this time, no country in Europe where a man is free to dis- 
pose of his industry and capital in what manner he pleases; in most 
places he cannot even change his occupation or place of residence 
at pleasure. It is not enough for a man to have the necessary quali- 
fications of ability and inclination to become a manufacturer or 
dealer in the woollen or silk line, in spirits or calicoes; he must 
besides have served his time, or been admitted to the freedom 
of the craft* Freedoms and apprenticeships are likewise expedients 
of police, not of that wholesome branch of police, whose object is 
the maintenance of public and private security, and which is neither 
costly and vexatious; but of that sort of police which bad govern- 
ments employ to preserve or extend their personal authority at any 
expense. By the dispensation of honorary or pecuniary advantages, 
authority can generally influence the chiefs and superiors it has 
appointed to the corporations, who think to earn these honours and 
emoluments by their subservience to the power that confers them. 
These are the ready tools for the management of the body at large, 
and volunteer to denounce the individuals, whose firmness may be 
formidable, and report those, whose servility may be reckoned upon, 
and all under the pretext of public good. Official harangues and 
public addresses are never wanting in plausible reasons for the contin- 
uance of old restrictions on liberty of action, or for the establish- 
ment of new ones; for there is no cause so bad as to be without some 
argument or other in its favour. 

The chief advantage, and the one most relied upon, is, the insu- 
rance of a more perfect execution of the products raised for consump- 
tion, and of a superiority in them highly favourable to the national 
commerce, and calculated to secure the continued demand of foreign- 
ers. But does this advantage result from the system in question? 
What security is there that the corporate body itself will always be 
composed of men not merely of integrity, but of scrupulous delicacy, 
such as would never be disposed to take in either their own country- 
men or foreigners? We are told that this system facilitates the 
enforcement of regulations for the warranty and verification of the 
quality of products; but are not such regulations illusory in practice, 

* When industry made its first start in the middle ages, and the mercantile 
classes were exposed to the rapacity of" a grasping and ignorant nohility, incorpo- 
rated trades and crafts were useful in extending to individual industry the protec- 
tion of the association at large. Their utility has ceased altogether of late years; 
for governments have, in our days, been either too enlightened to encroach upon 
the sources of financial prosperity, or too powerful to stand in awe of such 
associations. 



182 ON PRODUCTION. book i. 

even under the corporate system? and, supposing them absolutely 
necessary, is there no more simple way of enforcing them? 

Neither will the length of apprenticeship be a better guarantee of 
the perfection of the work; the only thing to be depended upon for 
that perfection is the skill of the workman, and that is best attained 
by paying him in proportion to his superiority. " To teach any 
young man," says Smith, " in the completest manner how to apply 
the instruments, and how to construct the machines of the common 
mechanic trades, can not well require the lessons of more than a few 
weeks, perhaps those of a few days might be sufficient. The dexter- 
ity of hand, indeed, even in common trades, cannot be acquired 
without much practice and experience, but a young man would prac- 
tice with much more diligence and attention, if from the beginning 
he wrought as a journeyman, being paid in proportion to the little 
work which he could execute, and paying in his turn for the mate- 
rials which he might sometimes spoil through awkwardness and 
inexperience."* 

Were apprentices bound out a year later, and the interval spent 
in schools conducted on the plan of mutual instruction, I can hardlj^ 
think the products would be worse executed; and, beyond all doubt, 
the labouring class would be advanced a stage in civilization. 

Were apprenticeships a sure means of attaining a greater perfec- 
tion of products, those of Spain would be as good as those of Britain. 
It was not before incorporated trades and compulsory apprentice- 
ships had been abolished in France, that she attained that superiority 
of execution she has now to boast of. 

Perhaps there is no one mechanic art nearly so difficult as that of 
the gardener or field labourer; yet this is almost the only one that 
has no where been subjected to apprenticeship. Are vegetables and 
fruits produced in less abundance or perfection? Were cultivators 
a corporate body, I suppose it would soon be asserted, that high-fla- 
voured peaches and white-heart lettuces, could not be raised without 
a code of some hundred well penned articles. 

After all, regulations of this nature, even admitting their utility, 
must be nugatory as soon as evasion is allowed; now it is notorious 
that there is no manufacturing towns where money will not purchase 
exemption. So that they are more than merely useless as a warranty 
of quality; inasmuch as they are an engine of the most odious injus- 
tice and extortion. 

In support of these opinions, the advocates for the corporate sys- 
tem appeal to the example of Great Britain, where industry is well 
known to be greatly shackled, and yet manufactures prosper. But 
in this they expose their ignorance of the real causes of that pros- 
perity. " These causes," Smith tells us, " seem to be the general 
liberty of trade, which, notwithstanding some restraints, is at least 
equal, perhaps superior, to what it is in any other country; the 
liberty of exporting, duty free, almost all sorts of goods, which are 
the produce of domestic industry, to almost any foreign country; 

* Wealth of Nations, book i. c. 10. 



CHAP. XVII. ON PRODUCTION. 183 

and, what perhaps is of still greater importance, the unbounded 
liberty of transporting them from any one part of our own country 
to any other, without being obliged to give any account to any pub- 
lic office, without being liable to question or examination of any 
kind, &c."* Add to these, the complete inviolability of all property 
whatever, either by public or private attack, the enormous capital 
accumulated by her industry and frugality, and lastly, the habitual 
exercise of attention and judgment, to which her population is trained 
from the earliest years; and there is no need of looking farther for 
the causes of the manufacturing prosperity of Britain. 

Those who cite her example in justification of their desire to 
enthral the exertions of industry, are not perhaps aware that the 
most thriving towns in that kingdom, those on which her character 
for manufacturing pre-eminence is mainly built, are the very places 
where there are no incorporations of crafts and trades; Manchester, 
Birmingham, and Liverpool,! were mere villages a century or two 
ago, but now rank in point of wealth and population next to London, 
and much before York, Canterbury, and even Bristol, cities of the 
greatest antiquity and privileges, and the capitals of her most thriv- 
ing provinces, but still subjected to the shackles of these Gothic 
institutions. " The town and parish of Halifax," says Sir Joha 
Nickolsjj a writer of acknowledged local information, " has, within 
these forty years, seen the number of its inhabitants quadrupled; 
whilst many other towns, subjected to corporations, have experien- 
ced a sensible diminution of theirs. Houses situated within the pre- 
cincts of the city of London hardly find tenants, and numbers of 
them remain empty: whilst Westminster, South wark, and the other 
suburbs are continually increasing. These suburbs are free, whilst 
London supports within itself four score and twelve exclusive com- 
panies of all kinds, of which we may see the members annually 
adorn, with a silly pageantry, the tumultuous triumphal procession 
of the Lord Mayor." 

The prodigious manufacturing activity of some of the suburbs of 
Paris is notorious; of the Faubourg St. Antoine, in particular, where 
industry enjoyed many exemptions. Some products were made no 
where else. How happened it, that without apprenticeships, or the 
necessity of being free of the craft, the manufacturer required a 
greater degree of skill, than in the rest of the city, which was subject 
to those institutions that are held up as so indispensable? For a 
very simple reason: because self-interest is the best of all instructors. 

An example or two will serve better than all reasoning in the 
world, to show the impediments thrown in the way of the develop- 

* Wealth of Nations, book iv. c. 7. f JBaert. vol. i. p. 107. 

4: Remarks on the Advantages and Disadvantages of France and of Great Britain, 
12mo. 1754, § 4, p. 142.(a) 



(a) This work was originally published in French in 1752, with great success, 
under the fictitious name of Sir John Nickols, and is supposed to have been the 
production of a foreigner employed about the court of Versailles. It contains 
many judicious remarks upon the internal policy of Britain. T. 



184 ON PRODUCTION. book i. 

ment of industry by incorporations of trades and crafts. Argand, 
the inventor of the lamps that go by his name, and yield, at the same 
expense, triple the amount of light, was dragged before the Parle- 
ment de Paris, by the company of tinmen, locksmiths, ironmon- 
gers, and journeymen farriers, who claimed the exclusive right of 
making lamps.* Lenoir, the celebrated Parisian philosophical and 
mathematical instrument maker, had set up a small furnace for the 
convenience of working the metals used in his business. The syn- 
dics of the founders' company came in person to demolish it; and he 
was obliged to apply to the king for protection. Thus was talent 
dependent upon court favour. The manufacture of japanned hard- 
ware was altogether excluded from France until the era of the revo- 
lution, by the circumstance of its requiring the skill and implements 
of many different trades, and the necessity of being admitted to the 
freedom of them all, before an individual could carry it on. It would 
be easy to fill a volume with the recapitulation of the disheartening 
vexations that personal industry had to encounter in the city of 
Paris alone, under the corporate system; and another with that of 
the successful efforts made, since that system was abolished by the 
revolution. 

For the same reason that the free suburb of a chartered town, or 
a free town in the midst of a country embarrassed by the officious- 
ness of a meddling government, will exhibit an unusual degree of 
prosperity, a nation that enjoys the freedom of industry, in the midst 
of others following the corporate system, would probably reap simi- 
lar advantages. Those have thriven the most, that have been the 
least shackled by the observance of formalities, provided, of course, 
that individuals be secured from the exactions of power, the chica- 
nery of law, and the attempts of dishonesty or violence. Sully, 
whose whole life was spent in the study and practice of measures for 
improving the prosperity of France, entertained this opinion.t In 
his memoirs, he notices the multiplicity of useless laws and ordi- 
nances, as a direct barrier to the national progress.^ 

* " Why not get himself made free of the company 1" say those who are ever 
ready to palliate or justify official abuse. The corporation, which had the con- 
trol over admissions, was itself interested in thwarting a dangerous competitor. 
Besides, why compel the ingenious inventor to waste in a personal canvass, that 
time which would be so much more profitably occupied in his calling ? 

f Liv. xix. 

X Colberfs early education in the counting-house of the Messrs. Maserani, of 
Lyons, a very considerable mercantile establishment, very early imbued him. 
with the principles of the manufacturers. Commerce and manufacture thrived 
prodigiously under his powerful and judicious patronage; but, though he liberated 
them from abundance of oppression, he was himself hardly sparing enough of 
ordinances and regulations; he encouraged manufactures at the expense of agri- 
culture, and saddled the people at large with the extraordinary profits of monopo- 
lists. We cannot shut our eyes to the fact, that to this system, acted upon ever 
since the days of Colbert, France owed the striking inequalities of private fortune, 
the overgrown wealth of some, and the superlative misery of others; the contrast 
of a few splendid establishments of industry, with a- wide waste of poverty and 
degradation. This is no ideal picture, but one of sad reality, which the study of 
principles will help us to explain. 



CHAP. xvii. ON PRODUCTION. 185 

It may, perhaps, be alleged, that, were all occupations quite free, 
a large proportion of those who engaged in them would fall a sacri- 
fice to the eagerness of competition. Possibly they might, in some 
few instances, although it is not very likely there should be a great 
excess of candidates in a line, that held out but little prospect of gain; 
yet, admitting the casual occurrence of this evil, it would be of 
infinitely less magnitude, than permanently keeping up the prices of 
produce at a rate that must limit its consumption, and abridge the. 
power of purchasing in the great body of consumers. 

If the measures of authority, levelled against the free disposition 
of each man's respective talents and capital, are criminal in the eye 
of sound policy, it is still more difficult to justify them upon the 
principles of natural right. " The patrimony of a poor man," says 
the author of the Wealth of Nations, '• lies in the strength and dex- 
terity of his hands: and to hinder him from employing this strength 
and dexterity in what manner he thinks proper, without injury to 
his neighbour, is a plain violation of his most sacred property." 

However, as society is possessed of a natural right to regulate the 
exercise of any class of industry, that without regulation might pre- 
judice the rest of the community, physicians, surgeoijs, and apothe- 
caries, are with perfect justice subjected to an examination into their 
professional ability. The lives of their fellow-citizens are dependent 
upon their skill, and a test of that skill may fairly be established; 
but it does not seem advisable to limit the number of practitioners 
nor the plan of their education. Society has no interest further than 
to ascertain their qualification. 

On the same grounds, regulation is useful and proper, when aimed 
at the prevention of fraud or contrivance, manifestly injurious to 
other kinds of production, or to the public safety, and not at pre- 
scribing the nature of the products and the methods of fabrication. 
Thus, a manufacturer must not be allowed to advertise his goods to the 
public as of better than their actual quality: the home consumer is 
entitled to the public protection against such a breach of faith; and 
so, indeed, is the mercantile character of the nation, which must suf- 
fer in the estimation and demand of foreign customers from such 
practices. And this is an exception to the general rule, that the best 
of all guarantees is the personal interest of the manufacturer. For, 
possibly, when about to give up business, he may find it answer to 
increase his profit by a breach of faith, and sacrifice a future object 
he is about to relinquish for a present benefit. A fraud of this kind 
ruined the French cloths in the I^evant market, about the year 
1783; since when the German and British have entirely supplanted 
them.* We may go still further. An article often derives a value 
from the name, or from the place of its manufacture. When we 
judge from long experience, that cloths of such a denomination, and 

* The loss of this trade has been erroneously imputed to the liberty of com- 
merce, consequent upon the revolution. But Felix Beaujour, in his Tableau du 
Commerce de la Grece, has shown that it must be referred to an earlier period, 
when restrictions were still in force. 
24 



186 ON PRODUCTION. book i. 

made at such a place, will be of a certain breadth and substance, it is 
a fraud to fabricate, under the same name and at the same place, a 
commodity of inferior substance and quality to the ordinary stand- 
ard, and thus to send it into the world under a false certificate. 

Hence we may form an opinion of the extent to which govern- 
ment may carry its interference with benefit. The correspondence 
with the sample of conditions, express or implied, must be rigidly 
enforced, and government should meddle with production no further. 
I would wish to impress upon my readers, that the mere interference 
is itself an evil, even where it is of use:* first, because it harasses and 
distresses individuals; and, secondly, because it costs money, either 
to the nation, if it be defrayed by government, that is to say, charged 
upon the public purse, or to the consumer, if it be charged upon the 
specific article; in the latter case, the charge must of course enhance 
the price, thereby laying an additional tax upon the home consumer, 
and pro tanto discouraging the foreign demand. 

If interference be an evil, a paternal government will be most 
sparing of its exercise. It will not trouble itself about the certifica- 
tion of such commodities, as the purchaser must understand better 
than itself; orjof such as cannot well be certified by its agents; for, 
unfortunately,' a government must always reckon upon the negli- 
gence, incapacity, and misconduct of its retainers. But some arti- 
cles may well admit of certification; as gold and silver, the standard 
of which can only be ascertained by a complex operation of chem- 
istry, which few purchasers know how to execute, and which, if 
they did, would cost them infinitely more than it can be executed 
for by the government in their stead. 

In Great Britain, the individual inventor of a new product or of a 
new process may obtain the exclusive right to it, by obtaining what 
is called a patent. While the patent remains in force, the absence of 
competitors enables him to raise his price far above the ordinary 
return of his outlay with interest, and the wages of his own indus- 
try. Thus he receives a premium from the government, charged 
upon the consumers of the new article; and this premium is often 
very large, as may be supposed in a country so immensely produc- 
tive as Great Britain, where there are consequently abundance of 
affluent individuals, ever on the lookout for some new object of 
enjoyment. Some years ago a man invented a spiral or worm spring 
for insertion between the leather braces of carriages, to ease their 
motion, and made his fortune by the patent for so trifling an 
invention. 

Privileges of this kind no one can reasonably object to; for they 
neither interfere with, nor cramp any branch of industry, previously 
in operation. Moreover, the expense incurred is purely voluntary; 
and those who choose to incur it, are not obliged to renounce the 
satisfaction of any previous wants, either of necessity or of amuse- 
ment 

* " Every restraint, imposed by legislation, upon the freedom of human 
action, must inevitably extinguish a portion of the energies of the community, 
and abridge its annual product."— Fotv. A'q^. sur I'Econ. Fol. c. 12. 



CHAP. XVII. ON PRODUCTION. 187 

However, as it is the duty of every government to aim at the con- 
stant amelioration of its subjects' condition, it cannot deprive other 
producers to eternity of the right to employ part of their industry 
and capital in this particular channel, which perhaps they might sooner 
or later have themselves discovered, or preclude the consumer for 
a very long period from the advantages of a competition-price. 
Foreign nations being out of its jurisdiction, would of course 
grant no privilege to the inventor, and would, therefore, in this par- 
ticular, during the operation of the patent, be better off than the 
nation where the invention originated. 

France* has imitated the wise example of England, in assigning a 
limit to the duration of these patent rights, after which the invention 
is free for all the world to avail themselves of. It is also provided, 
that, if the process be capable of concealment, it shall be divulged at 
the expiration of the term. And the patentee, who in this case, it 
may be supposed, could do without the patent, has this advantage: 
that if his secret be discovered by any body in the interim, it cannot 
be made available till the expiration of the term. 

Nor is it at all necessary that the government should inquire into 
the novelty or utility of the invention; for, if it be useless, so much 
the worse for the inventor; and, if it be already known, every body 
is competent to plead and prove that fact, and the previous right of 
the public; so that the only sufferer is the inventor, who has been 
at the expense of a patent for nothing. Thus the public is no loser 
by this species of encouragement, but, on the contrary, may derive 
prodigious advantage. 

The regulations tending to direct either the object or the method 
of production, which have been above observed upon, by no means 
comprise all the measures adopted by different nations with those 
views. Indeed, were I to specify them all, my catalogue would 
soon be incomplete; for new ones are every day brought into prac- 
tice. The great point is, to lay down certain principles, that may 
enable us beforehand to judge of their consequences. But there are 
two other branches of commerce, that have been the subject of more 
than usual regulation, and are, therefore, worthy of more special 
investigation. I shall devote the two succeeding sections to their 
exclusive examination. 

Section III. 
Of Privileged Trading Companies. 

A government sometimes grants to individual merchants, and 
much oftener to trading companies, the exclusive privilege of buying 
and selling specific articles, tobacco for example; or of trafficking 
with a particular country, as with India. 

* Vide the laws dated 7th Jan. and 25th May, 1791, and 20th Sept. 1792. 
Also the arret of the government, dated 5 Vandemaire, an. ix. 



188 ON PRODUCTION. book i. 

The privileged traders, being thus exempted from all competition 
by the exertion of the public authority, can raise their prices above 
the level that could be maintained under the appellation of a free 
trade. This unnatural ratio of price is sometimes fixed by the 
government itself, which thus assigns a limit to the partiality it ex- 
ercises towards the producers, and the injustice it practices upon the 
consumers: otherwise, the avarice of the privileged company would 
be bounded only by the dread of losing more by the reduction of 
the gross amount of its sales, in consequence of increased prices, 
than it would gain by their unnatural elevation. At all events, the 
consumer pays for the commodity more than its worth; and govern- 
ment generally contrives to share in the profits of monopoly. 

It has been said, for the most ruinous expedient is sure to find 
some plausible argument or other to support it, that the commerce 
with certain nations requires precautionary measures, which privi- 
leged companies only can enforce. At one time the plea is, that 
forts must be built, and marine establishments kept up; as if in truth 
it were worth while to traffic sword in hand, or an army were neces- 
sary to protect plain dealing; or as if the state did not already main- 
tain at great charge a military force for the protection of its subjects! 
At another, that diplomatic address is indispensable. The Chinese, 
for instance, are a people so bigoted to form and prone to suspicion — 
so entirely independent of other nations, by reason of their remote 
position, the extent of their territory, and the peculiar character of 
their wants, that it is a matter of special and precarious favour to be 
allowed to deal with them. We must, therefore, elect either to go 
without their teas, silks, and nankeens, or be content to submit to 
precautions, which can alone insure the continuance of the trade; 
for the dealings of individuals might endanger the continuance of 
that good humour, without which the mutual intercourse of the two 
nations would be at an end. 

But, let me ask, is it so certain that the agents of a company, who 
are too apt to presume upon the support of the military power, 
either of the nation or at least of the company, — is it quite certain, 
that such agents are more likely to keep alive an amicable feeling 
than private traders, in whom more deference to local institutions 
might be expected, and who would have an immediate interest in 
keeping clear of any misunderstanding that should endanger both 
their persons and their property?* 

But, supposing the worst that could happeh, and granting, for 
argument's sake, that the trade with China can not be conducted 
otherwise than by a privileged company, does it follow, that with- 
out one we must needs give up the taste for Chinese productions? 

* This has been exemplified in the commercial relations of the United States 
with China. The American traders conduct themselves at Canton with more 
discretion, and are regarded by the Chinese authorities with less jealousy than 
the agents of the English company. The Portuguese, for upwards of a cen- 
tury, carried on the trade with the Eastern seas, without the intervention of a 
company, and with greater success than any of their cotemporaries. 



CHAP. XVII. ON PRODUCTION. 189 

Certainly not. The trade in Chinese goods will always exist, for 
this plain reason, that it suits both parties, the Chinese and their 
customers. But shall we not pay dearer for those goods? There is 
no ground for thinking so. Three-fourths of the European states 
have never sent a single ship to China, and yet are abundantly sup- 
plied with teas, with silks, and with nankeens, and that too at a very 
cheap rate. 

There is another argument of more general application, and still 
more frequently urged; viz. that a company, having the exclusive 
trade of any given country, is exempt from the effects of competi- 
tion, and, therefore, buys at a less price. But, in the first place, it 
is not true that the exclusive privilege exempts from the effect of 
competition: the only competition it removes, is that of the national 
traders, which would be of the utmost benefit to the nation; but it 
excludes neither the competition of foreign companies, nor of foreign 
private traders. In the next place, there are many articles that 
would not rise in price in consequence of the competition, which 
some people affect to be alarmed at, though in truth it is a mere 
bug-bear. 

Suppose Marseilles, Bordeaux, L'Orient, were all to fit out vessels 
to bring tea from China, we have no reason to believe that all their 
ventures together would import more tea into France, than France 
could consume or dispose of. All we have to fear is, that they should 
not import enough. Now, if they were to import no more than other 
merchants would have imported for them, the demand for tea in 
China will have been just the same in both cases; consequently, the 
commodity will not have become more scarce there. Our merchants 
would hardly have to pay dearer for it, unless the price should rise 
in China itself; and what sensible effect could the purchases of a few 
merchants of Fi'ance have upon the price of an article consumed in 
China itself, to one hundred times the amount of the whole consump- 
tion of Europe? 

But, granting that European competition would operate to raise 
the price of some commodities in the eastern market, is that a suffi- 
cient motive for excepting the trade to that part of the world from 
the general rules that are acted upon in all other branches of com- 
merce? Are we to invest an exclusive company with the sole con- 
duct of the import or export trade between Germany and France, for 
the sole purpose of getting our cottons and woollens from Germany 
at a cheaper rate? If the commerce of the East were put upon the 
same footing as foreign trade in general, the price of any one article 
of its produce could never long remain much above the cost of pro- 
duction in Asia; for the rise of price would operate as a stimulus to 
increased production, and the competition of sellers would soon be on 
a par with that of purchasers. 

But, admitting the advantage of buying cheap to be as substantial 
as it is represented, the nation at large has a right to participate in 
that cheapness; the home consumers ought to buy cheap as well as 
the company. Whereas in practice it is just the reverse, and, for a 



190 ON PRODUCTION. book i. 

very simple reason: the company is not exempt from competition as 
a purchaser, for other nations are its competitors: but as a seller it is 
exempt; for the rest of the nation can buy the articles it deals in no 
where else, the import by foreigners being wholly prohibited. It 
asks its own price, and can command the market, especially if it be 
attentive to keep the market always understocked, as the English 
call it; that is, if the supply be just so far short of the demand, as to 
keep alive the competition of purchasers.* 

In this manner, trading companies not only extort exorbitant 
profits from the consumer, but moreover saddle him with all the 
fraud and mismanagement inseparable from the conduct of these 
unwieldy bodies, with their cumbrous organization of directors and 
factors without end, dispersed from one extremity of the globe to the 
other. The only check to the gross abuses of these privileged 
bodies is the smuggling or contraband trade, which, in this point of 
view, may lay claim to some degree of utility. 

This analysis brings us to the point in question; are the gains of 
the privileged company, national gains? Undoubtedly not; for they 
are wholly taken from the pockets of the nation itself. The whole 
excess of value, paid by the consumer, beyond the rate at which free 
trade could afford the article, is not a value produced, but so much 
existing value presented by the government to the trader at the con- 
sumer's expense. It will probably be urged, that it must at least be 
admitted, that this profit remains and is spent at home. Granted: 
but by whom is it spent? that is the point. Should one member of 
a family possess himself of the whole family income, dress himself 
in fine clothes, and devour the best of every thing, what consolation 
would it be to the rest of the family, were he to say, what signifies 
it whether you or I spend the money? the income spent is the same, 
so it can make no difference. 

The exclusive as well as excessive profits of monopoly would soon 
glut the privileged companies with wealth, could they depend upon 
the good management of their concerns; but the cupidity of agents, 
the long pendency of distant adventures, the difficulty of bringing 
factors abroad to account, and the incapacity of those interested, are 
causes of ruin in constant activity. Long and delicate operations of 
commerce require superior exertion and intelligence in the parties 
interested. And how can such qualities be expected in shareholders, 
amounting sometimes to several hundreds, all of them having other 
matters of more personal importance to look after?t 

Such are the consequences of privileges granted to trading compa- 

* It is well known, that, when the Dutch were in possession of the Mohiccas, 
they were in the habit of burning part of the spices they produced, for the sake 
of keeping up the price in Europe. 

f The answer of La Bourdonnais to one of the directors of the French East 
India Company, who asked how it was, that he had managed his own interests 
so much better than those of the company, will long be remembered: — " Be- 
cause," said he, " I manage my own affairs according to the dictates of my own 
judgment, but am obliged to follow your instructions in regard to those of the 
company." 



CHAP. XVII. ON PRODUCTION. 191 

nies: and these consequences, it must be observed, are in the nature 
ot things inseparable; circumstances may reduce their efficacy, but 
can never remove them altogether. The English East India Com- 
pany has met with more success than the three or four French ones 
that at ditierent times made the experiment.* This company is 
sovereign as vyell as merchant; and we know, by experience, that the 
most detestable governments may last for several generations: wit- 
ness that of the Mamalukes in Egypt.(l) 

There are some minor evils also incident to commercial privileges 
I he grant of exclusive rights frequently exiles from a country a 
branch of industry and a portion of capital that would readily have 
taken root there, but are compelled to settle abroad. Towards the 
close of the reign of Louis XI V^ the French East India Company, 
being unable to support itself, notwithstanding its exclusive rights 
transferred the exercise of its privileges to some speculators at St 
Malo, in consideration of a small share in their profits. The trade 
began to revive under the influence of this comparative liberty, and 
would, on the expiration of the company's charter, in 1714, have 
been as active as the then melancholy condition of France would 
have permitted: but the company petitioned for a renewal, and ob- 
tained one, pending the ventures of some private traders. Soon 
afterwards, a vessel of St. Malo, commanded by a Breton of the 
name of Lamerville, appeared upon the French coast, on its return 
from the East Indies, but was refused permission to enter the har- 
bour, on the plea, that it was in contravention of the company's 
rights. Consequently, he was compelled to prosecute his voyage to 
the nearest port in Belgium, and carried his vessel into Ostend, 
where he disposed of the cargo. The governor of the Low Coun- 
tries, hearing of the enormous profits he had made, proposed to the 
captain a second voyage, with a squadron to be fitted out for the 
express purpose; and Lamerville afterwards performed many simi- 

nr* T^^ ^^^^ French East India Company was established in the reign of Henry 
IV. A. D. 1604, at the instance of a Fleming of the name of Gerard Leroi. It 
met with no success. 



1 (?.)'l^e commercial monopoly of the English Eastlndia Company was finally 
abolished by three acts of parliament, passed during the year 1833, namelv, 
chapters 85, 93, and 101 of the 3d and 4th William IV. The first is entitled, an 
act for eflecting an arrangement with the East India Company, and for the better 
government ot his majesty's Indian territories, till the 30th day of April, 1854; 
the second, an act to regulate the trade to China and India; and the third, an act 
to provide for the collection and management of duties on tea. 

By these acts the trade with both China and India is thrown open, for the first 
time, to British enterprise and capital, and British subjects are also permitted to 
take up their residence in these countries. It is needless to point out the vast 
importance of these enactments, and the great advantages that must result from 
them, not only to British subjects, but to the whole commercial world. The 
resources of regions of rich countries that have hitherto lain dormant will now 
be called into activity, and the general wealth of the country, and its capacity of 
absorbing foreign commodities, immensely increased. 

American Editor. 



192 ON PRODUCTION. book i. 

lar voyages for diiFerent employers, and laid the foundation of the 
Ostend Company.* 

Thus, the French consumer must necessarily have suffered by 
this monopoly: and so, in fact, he did. But, at any rate, it will be 
supposed the company must have benefitted. Just the contrary: 
the company was itself ruined; in spite of the monopoly of tobacco, 
the lotteries, and other subsidiary grants bestowed on them by the 
government.t "In short," says Voltaire,^ "all that remained to 
France in the East was the regret of having, in the course of forty 
years, squandered enormous sums, to bolster up a company that 
never made a six-pence profit, never made any dividend from the 
resources of its commerce, either to its share-holders or creditors; 
and supported its establishments in India, solely by the underhand 
practice of pillage and extortion upon the natives." 

The only case in which the establishment of an exclusive com- 
pany is justifiable, is, when there is no other way of commencing a 
new trade with distant or barbarous nations. In that case, the 
charter is a kind of patent of invention, and confers an advantage, 
commensurate to the extraordinary risk and expense of the first 
experiment. The consumers have no reason to complain of the 
dearness of products, which, but for the grant of the charter, they 
would either not have enjoyed at all, or have enjoyed at a still 
dearer rate. But such grants should, like patents, be limited to such 
duration only, as will repay and fully indemnify the adventurers for 
the advances and risk incurred. Any thing further is a mere free 
gift to the company, at the expense of the nation at large, who have 
a natural right to get what they want wherever they can, and at the 
lowest possible price. 

What has been said with respect to commercial is equally applica- 
ble to manufacturing privileges. The reason why governments are 
so easily enti'apped into measures of this kind is, partly because they 
see a statement of large profits, and do not trouble themselves to in- 
quire whence they are derived; and partly because this apparent 
profit is easily reduced to numerical calculation, no matter whether 
wrong or right, correct or incorrect; whereas the loss and mischief 
resulting to the nation are infinitely subdivided amongst the mem- 
bers of the community, and operate after all in a very indirect, com- 
plex, and general way, so as to escape and defy calculation. Some 
writers maintain arithmetic to be the only sure guide in political 
economy; for my part, I see so many detestable systems built upon 
arithmetical statements, that I am rather inclined to regard that 
science as the instrument of national calamity. 

* Taylor's Letters on India. 

t Raynal. Hist.phil. etpolit, desEstabl. des Europeens, dans les deux Indes, liv. 
iv. § 19. 

X Steele de Louis XV. 



CHAP. XVII. ON PRODUCTION. I93 

Section IV. 
Of regulations affecting the Corn Trade. 

It would seem that the general principles, which govern the com- 
merce of all other commodities, should be equally applicable to the 
commerce of gram. But grain, or whatever else may happen to be 
the staple article of human subsistence to any people, deserves more 
particular notice. 

It is universally found, that the numbers of mankind increase, in 
proportion to the supply of subsistence. The abundance and cheap- 
ness of provisions are favourable to the advance of population- their 
scarcity is productive of the opposite effect;* but neither cause ope- 
rates so rapidly as the annual succession of crops. The crop of one 
year may, perhaps, exceed or fall short of the usual average, by as 
much as one-fifth or one-fourth; but a country, that, like France, has 
thirty millions of inhabitants one year, can not have thirty-six mil- 
lions the next; nor could its population be reduced to twenty-four 
niilhons in the space of one year, without the most dreadful degree 
of suffering. Therefore it is the law of nature, that the population 
shall one year be superabundantly supplied with subsistence, and 
another year be subjected to scarcity in some degree or other of 
intensity. 

And so, indeed, it is with all other objects of consumption; but 
as the most of them are not absolutely indispensable to existence, the 
temporary privation of them amounts not to the absolute extinction 
of life. The high price of a product, which has wholly or partially 
failed at home, is a powerful stimulus to commerce to import it from 
a greater distance and at a greater expense. But it is unsafe to leave 
wholly to the providence of individuals the care of supplying an 
article of such absolute necessity: the delay of which, but for a few 
days, may be a national calamity; the transport of which exceeds the 
ordinary means of commerce; and whose weight and bulk would 
make its distant transport, especially by land, double or triple its aver- 
age price. If the foreign supply of corn be relied upon, it may hap- 
pen to be scarce and dear in the exporting and the importing coun- 
try at the same moment. The government of the exporting country 
may prohibit the export, or a maritime war may interrupt the trans- 
port. But the article is one the nation can not do without; or even 
wait for a few days longer. Delay is death to a part of the population 
at least. 

For the purpose of equalizing the average consumption to the 
average crop, each family ought literally to lay by, in years of plenty, 
for the deficiency of years of scarcity. But such providence can not be 
reckoned upon in the bulk of the population. A great majority, to 
say nothing of their utter want of foresight, are destitute of the 
means of keeping such a store in reserve sometimes several years 

* Vide infra. Book II. chap. 11. 
25 *^ 



194 ON PRODUCTION. booki. 

together; neither have they the accommodations for housing it, or 
the means of taking it along with them on a casual change of abode. 

Can speculative commerce be depended upon for this reserve 
against a deficiency? At first sight it might appear that it could, 
*that self-interest would be an adequate motive; for the difierence of 
the price of corn in years of abundance and those of scarcity is very 
great. But the recurrence of the oscillation is too irregular in dis- 
tance of time, and too infrequent also to give rise to a regular traffic, 
or one that can be repeated at pleasure. The purchase of the grain, 
the number and size of the storehouses, require a very large advance 
of capital and a heavy arrear of interest: it is an article that must be 
repeatedly shifted and turned, and is much exposed to fraud and 
damage, as well as to popular violence. All these are to be covered 
by a profit of rare occurrence. Wherefore, it is possible, that the 
article may not hold out sufficient temptation to the speculator, 
although this would be the most commendable kind of speculation, 
being framed upon the principle of buying from the producer when 
be is eager to sell, and selling to the consumer when he finds it diffi- 
cult to purchase. 

In default of the individual providence of the consumer, and of 
speculative accumulation and reserve, neither of which it would seem 
can be safely depended upon, can the public authority, as represent- 
ing the aggregate interest, undertake the charge of providing against 
a scarcity with any prospect of success? I am aware, that, in a few 
very limited communities, blessed with a very economical govern- 
ment, like some of the Swiss cantons, public granaries for storing a 
casual surplus have answered the purpose well enough. But I should 
pronounce them impracticable in large and populous countries. The 
advance of capital and its accruing interest would affect the govern- 
ment in the same manner as private speculators, and even in a 
greater degree; for there are few governments, that can borrow on 
such low terms as individuals in good credit. The difficulties of 
managing a commercial concern of buying, storing, and re-selling to 
so large an extent, would be still more insuperable. Turgot, in his 
letters on the commerce of grain, has clearly proved, that, in matters 
of this kind, a government never can expect to be served at a reason- 
able rate; all its agents having an interest in swelling its expenditure, 
and none of them in curtailing. It would be utterly impossible to 
answer for the tolerable conduct of a business .left to the discretion 
of agents without any adequate control, whose actions are, for the 
most part, governed b}'^ the superior dignitaries of the state, who sel- 
dom have either the knowledge or condescension requisite for such 
details. A sudden panic in the public authorities might prematurely 
empty the granaries; a political measure, or a war divert their con- 
tents to quite a different destination. 

Generally speaking, it appears that there is no safe dependence for 
a reserve of supply against a season of scarcity, unless the business 
be confided to the discretionary management of mercantile houses of 
the first capital, credit, and intelligence, willing to undertake the 



CHAP. xvir. ON PRODUCTION. 195 

purchase, and the filling and replenishment of the granaries upon cer- 
tain stipulated terms, and with the prospect of such advantages, as 
may fairly recompense them for all their trouble. The operation 
would then be safe and effectual, for the contractors would give secu- 
rity for due performance; and it would also be cheaper executed in 
this way than in any other. Different establishments might he con- 
tracted with for the different cities of note; and these being thus sup- 
plied in times of scarcity from the stores in reserve, would no longer 
drain the country of the subsistence destined to the agricultural 
population. (a) 

Public stores and granaries are after all but auxiliary and tempo- 
rary expedients of supply. The most abundant and advantageous 
supply will always be that furnished by the utmost freedom of 
commerce, whose duties in respect to grain consists chiefly in trans- 
porting the produce from the farm-yard to the principal markets, 
and thence in smaller quantities from the markets of the districts 
where it is superabundant to those of others that may be scantily 
supplied; or in exporting when cheap, and importing when dear. 

Popular prejudice and ignorance have universally regarded with 
an evil eye those concerned in the corn-trade; nor have the deposi- 
tories of national authority been always exempt from similar illibe- 
rality. The main charge against them is, that they buy up corn with 
the express purpose of raising its price, or at least of making an 
unreasonable profit upon the purchase and resale, which is in effect 
so much gratuitous loss to the producer and consumer. 

First, 1 would ask, what is meant by this charge? If it be meant 
to accuse the dealers of buying in plentiful seasons, when corn is 
cheap, and laying by in reserve against seasons of scarcity, we have 
just seen that this is a most beneficial operation, and the sole means 
of accommodating the supply of so precarious an article to the regu- 
larity of an unceasing demand. Large stores of grain laid in at a 
low price contribute powerfully to place the subsistence of the popu- 
lation beyond risk of failure, and deserve not only the protection, 
but the encouragement of the public authorities. But, if it be meant 
to charge the corn-dealers with buying up on a rising market and 
on the approach of scarcity, and thereby enhancing the scarcity and 
the price, although I admit that this operation has not the same 

(a) It is singular, that, after the very careful revision which this section has 
undergone in the last edition, this paragraph should have been suffered to stand. 
Indeed, one would almost suspect that our author had left it rather in compli- 
ment to the popular notions of his own country, than from personal conviction of 
the propriety of the measure he suggests; which is impugned by the whole con- 
text of the remaining part of the section. The best security against famine is, 
the total absence of all official interference whatever, whether permanent or tem- 
porary, as the example of Great Britain will testify. There the government has 
at all times abstained from taking a personal part in the supply either of town or 
country, and has limited its interference to them ere export and import, which have 
only been cramped and impeded by ill-advised operations. Another important 
ground of security is, the variety of the national food. Upon this our author has 
observed. — Vide, infra. T. 



196 ON PRODUCTION. booki. 

recommendation of utility, and that the consumer is saddled with 
the additional cost of the operation without any direct equivalent 
benefit, for in this instance the deficiency of one year is not made 
good by the hoarded surplus of a preceding one, yet I can not think 
it has ever been attended with any very alarming or fatal conse- 
quences. Corn is a commodity of most extended production; and 
its price cannot be arbitrarily raised, without disarming the competi- 
tion of an infinity of sellers, and without an extent of dealing and of 
agency scarcely practicable to individuals. It is, besides, a most 
cumbersome and inconvenient article in comparison with its price, 
and, consequently, most expensive and troublesome in the carriage 
and warehousing. A store of any considerable value can not escape 
observation.* And its liability to damage or decay often makes 
sales compulsory, and exposes the larger speculators to immense loss. 

Speculative monopoly is, therefore, extremely difficult, and little 
to be dreaded. The kind of engrossment most prejudicial, as well 
as most difficult of prevention, is that practised by the domestic pru- 
dence of individuals in apprehension of a scarcity. Some, from 
excess of precaution, lay by rather more than they want; while farm- 
ers, farming proprietors, millers and bakers, who habitually keep a 
stock on hand, take care somewhat to swell that stock, in the idea 
that they shall sell to a profit whatever surplus there may be; and 
the infinite number of these petty acts of engrossment makes them 
greatly exceed, in the aggregate, all the united efibrts of speculation. 

But what if it should turn out, after all, that even the selfish and 
odious views of such speculators are productive of some good? 
When corn is cheap, it is consumed with less providence and fru- 
gality, and used as food for the domestic animals. The distant 
prospect of scarcity, or even a slight rise of price, is insufficient to 
check this improvidence betimes. If the great holders shut up their 
stores, however, the consequent anticipation of a rise of price imme- 
diately puts the public on their guard, and awakens the particular 
frugality and care of the little consumers, of whom the great mass of 
consumption is composed. Ingenuity is set at work to find a substi- 
tute for the scarce article of food, and not a particle is wasted. Thus, 
the avarice of one part of mankind operates as a salutary check upon 
the improvidence of the rest; and, when the stock withheld at length 
appears in the market, its quantity tends to lower the price in favour 
of the consumer. 

With regard to the tribute which the dealer is supposed to exact 
from both producer and consumer, it is a charge that will attach with 
equal justice upon every branch of commerce whatsoever. There 
would be some meaning in it, could products reach the hands of the 
consumer without any advance of capital, without warehouses, trou- 

* Lamarre, who was a great advocate for the interference of authority in these 
matters, and was commissioned by the government, in the scarcities of the years 
1699 — 1709, to discover all concealed hoards, and bring to light the monopolists, 
frankly confesses, that he was not able to make seizure of so much as 100 quar- 
ters altogether — TraiUdelaPoKce, Supplement au tome U. 



CHAP. XVII. ON PRODUCTION. 197 

ble, combination, or any kind of difficulty. But, so long as difficul- 
ties sliall exist, nobody will be able to surmount them so cheaply, as 
those who make it their sjjecial business. Legislation should take 
an enlarged view of commerce in the aggregate, small and great; it 
will find its agents busied in traversing the whole surface of the ter- 
ritory, watching every fluctuation of demand and supply, adjusting 
the casual or local deficiency of price to meet the charges of produc- 
tion and excess of price above the capacity of consumption. Is it 
to the cultivator, to the consumer, or to the public administration 
that we can safely look for so beneficial and powerful an agency? 
Extend, if you please, the facility of intercourse, and particularly 
the capacities of internal navigation, which alone is suited to the 
transport of a commodity so cumbrous and bulky as grain; vigilantly 
watch over the personal security of the trader; and then leave him 
to follow his own track. Commerce can not make good the failure 
of the crop; but it can distribute whatever there may be to distribute, 
in the manner best suited to tlie wants of the community, as well as 
to the interests of production. And doubtless it was for this reason 
that Smith pronounced the labour of the corn dealer to be favourable 
to the production of corn, in the next degree to that of the cultivator 
himself. 

The prevalence of erroneous views of the production and com- 
merce of articles of human subsistence have led to a world of mis- 
chievous and contradictory laws, regulations, and ordinances, in all 
countries, suggested by the exigency of the moment, and often ex- 
torted by popular importunity. The danger and odium thus heaped 
upon the dealers in grain have frequently thrown the business into 
the hands of inferior persons, qualified neither by information nor 
ability for the business; and the usual consequence has followed; 
namely, that the same traffic has been carried on in secret, at far 
greater expense to the consumers ; the dealers to whom it was 
abandoned being of course obliged to pay themselves for all the risk 
and inconvenience of the occupation. 

Whenever a maximum of price has been affixed to grain, it has 
immediately been withdrawn or concealed. The next step was to 
compel the farmers to bring their grain to market, and prohibit all 
private sales. These violations of property, with all their usual 
accompanim.ents of inquisitorial search, personal violence, and in- 
justice, have never afiorded any considerable resource to the govern- 
ment employing them. In polity as well as morality, the grand 
secret is, not to constrain the actions, but to awaken the inclinations 
of mankind. Markets are not to be supplied by the terror of the 
bayonet or the sabre.* 

When the national government attempts to supply the population 

♦ The French minister of the interior, in his report, presented in December, 
1817, admits that the markets were never so ill supplied as immediately after 
the decree of May 4, 1812, prohibiting all sales out of open market. The con- 
sumers crowded thither, having no where else to resort to; while the farmers, 
being obliged to sell below the current price, pretended to have nothing for sale. 



198 ON PRODUCTION. book i. 

by becoming itself a dealer, it is sure to fail in satisfying the national 
wants itself, and at the same time to extinguish all the resources that 
freedom of commerce would offer; for nobody else will knowingly 
embark in a losing trade, though the government may. 

During the scarcity prevalent throughout many parts of France, 
in the year 1775, the municipalities of Lyons and some other towns 
attempted to relieve the wants of the inhabitants, by buying up corn 
in the country, and re-selling it at a loss in the towns. To defray 
the expense of this operation, they at the same time obtained an in- 
crease of the octroi or tolls upon goods entering their gates. The 
scarcity grew worse and worse, for a very obvious reason; the ordi- 
nary dealers naturally abandoned markets where goods were sold 
below the cost price, and which they could not resort to without 
paying extra toll upon entry.* 

The more necessary an article is, the more dangerous it is to re- 
duce its price below the natural level. An accidental dearness of 
corn, though doubtless a most unwelcome occurrence,-is commonly 
brought about by causes out of all human power to remove.t There 
is no wisdom in heaping one calamity upon another, and passing 
bad laws because there has been a bad season. 

Governments have met with no better success in the matter of 
importation, than in the conduct of internal commerce. The enor- 
mous sacrifices made by the commune of Paris and the general 
government, to provision the metropolis in the winter of 1816—17 
with grain imported from abroad, did not protect the consumer from 
an exorbitant advance in the price of bread, which was besides de- 
ficient both in weight and quality; and the supply was found inade- 
quate after all. J 

* In all ages and in all places this effect will follow. The Emperor Julian, 
A. D. 362, caused to be sold at Antioch 420,000 modii of wheat imported from 
Chalsis and Egypt for the purpose, at a price lower than the average of the 
market; the supplies of private commerce were immediately stopped in conse- 
quence, and the famine was aggravated. Vide Gibbon, c. 24. The principles 
of political economy are eternal and immutable; but one nation is acquainted 
with them and another not. 

The metropolis of the Roman empire was always destitute of subsistence, 
when the government withheld the gratuitous largesses of grain drawn from a 
tributary world; and these very largesses were the real cause of the scarcity 
felt and complained of. 

J One of the most frequent causes of famine is, indeed, of human creation, 
that is war, which both interrupts production, and wastes existing products. 
This cause is, therefore, within human control; but we can hardly expect it to 
be effectually exerted, until governments shall entertain more accurate notions of 
their own, as well as of the national interests; and nations be weaned of the 
puerility of attaching sentiments of admiration and glory to perils encountered 
without necessity or reason. 

X It is mere mockery to talk of the paternal care, solicitude, or beneficence of 
government, which are never of any avail, either to extend the powers of au- 
thority, or to diminish the suffering of the people. The solicitude of the govern- 
ment can never be doubted; a sense of intense personal interest will always 
guide it to the conservation of social order, by which it is sure to be the principal 
gainer. And its beneficence can have little merit; for it can exert none, but at 
the expense of its subjects. 



CHAP. XVII. ON PRODUCTION. 199 

On the subject of bounties on import, it is hardly necessary to 
touch. The most effectual bounty is the high price of the article in 
the country where the scarcity occurs, amounting sometimes to as 
much as 200 or 300 per cent. If this be not sufficient to tempt the 
importer, I know of no adequate inducement that the government 
could hold out to him. 

Nations would be less subject to famine, were they to employ a 
greater variety of aliments. When the whole population depends 
upon a single product for subsistence, the misery of a scarcity is 
extreme. A deficiency of corn in France is as bad as one of rice in 
Hindustan. When their diet consists of many articles, as butcher's 
meat, poultry, esculent roots, vegetables, fruits, fish, &c., according 
to local circumstances, the supply is less precarious; for these arti- 
cles seldom fail all at a time.* 

Scarcity would also be of less frequent recurrence, if more atten- 
tion were paid to the dissemination and perfection of the art of 
preserving, at a cheap rate, such kinds of food, as are offered in 
superabundance at particular seasons and places; fish, for instance; 
their periodical excess might in this way be made to serve for times 
of scarcity. A perfect freedom of international maritime inter- 
course would enable the inhabitants of the temperate latitudes to 
partake cheaply of those productions, that nature pours forth in such 
profusion under a tropical sun.t I know not how frir it would be 
possible to preserve and transport the fruit of ftie banana; but the 

* Custom, the tyrant of weak minds, and of such, unfortunately, is the great 
mass of mankind, and oCthe lower classes in particular, is always a formidable 
opponent to the introduction of a new article of food. I have observed in some 
provinces of France, a decided distaste for the paste prepared in the Italian me- 
thod, although a most nutritious substance, and well calculated for keeping the 
flour sound and good. Probably, nothing but the frequent recurrence of scarcity 
during the political agitations of the nation could have extended the cultivation 
and consumption of the potatoe, so as to have made it a staple article of food in 
many districts. The appetite for that vegetable would be still more general, 
were a little more attention bestowed upon preserving and ameliorating the 
species, and the practice of raising it from the seed rather than the root more 
strictly observed. 

f Humboldt tells us, in his Essai pol. sur la Nouvelle Espagne, c. ix. that an 
equal area of land in that country will produce bananas, potatoes, and wheat, in 
the following proportions of weight: — 

Kilogrammes. 

Bananas 106,000 

Potatoes 2,400 

Wheat - 800 

The product of bananas is, therefore, in weight, 133 times that of wheat, and 
44 times that of potatoes. But a large deduction must be made for the aqueous 
particles of the banana. 

A demi-hedare of fertile land in Mexico, by proper cultivation of the larger 
species of banana, ma^fbe made to feed more than 50 individuals; whereas the 
same extent of surface in Europe, supposing it to yield eight-fold, will give an 
annual product of no more than 576 kils. of wheat flour, which is not enough for 
the sustenance of two persons. It is natural that Europeans, on their first arrival 
in a tropical region, should be surprised at the very limited extent of cultivated 
ground, encircling the crowded cabins of the native population. 



200 ON PRODUCTION. book i. 

experiment has in a great measure succeeded with respect to the 
sugar-cane, which furnishes, in a thousand shapes, an agreeable and 
wholesome article of diet, and is produced so abundantly by all 
parts of the world, lying within 38° of latitude, that, but for our 
present absurd legislative provisions, it might be had much cheaper 
than butcher's meat, and for the same price as many indigenous fruits 
and vegetables.* 

To return to the corn-trade, I must protest against the indiscrimi- 
nate and universal application of the arguments I have adduced to 
show the benefits of liberty. Nothing is more dangerous in prac- 
tice, than an obstinate, unbending adherence to system, particularly 
in its application to the wants and errors of mankind. The wiser 
course is, to approximate invariably to the standard of sound and 
acknowledged principles, to lead towards them by the never-failing 
influence of gradual and insensible attraction. It is well to fix be- 
forehand a maximum of price beyond which exportation of grain 
shall either be prohibited, or subjected to heavy duties; for, as smug- 
gling can not be prevented entirely, it is better that those who are 
resolved to practise it should pay the insurance of the risk to the 
state than to individuals. 

We have hitherto regarded the inflated price of grain as the only 
evil to be apprehended. But England, in 1815, was alarmed by a 
prospect of afl opposite evil; viz: that its price would be reduced too 
low by the influx ot foreign grain. The production of this article 
is, like that of every other, much more costly in England than in the 
neighbouring states, owing to a variety of causes, which it is im- 
material here to explain; amongst others, chiefly to the exorbitance 
of her taxation. Foreign grain could be sold in England at two- 
thirds of its cost price to the English grower. It, therefore, became 
a most important question, whether it were better to permit the free 
importation, and thus, by exposing the home producer to a ruinous 
competition with the foreign grower, to render him incapable of 
paying his rent and taxes, to divert him from the cultivation of 
wheat altogether, and place England in a state of dependence for 
subsistence upon foreign, perhaps hostile nations; or, by excluding 
foreign grain from her market, to give a monopoly to the home pro- 
ducer, at the expense of the consumer, thereby augmenting the diffi- 
culty of subsistence to the labouring classes, and, by the advanced 
price of the necessaries of life, indirectly raising that of all the manu- 
factured produce of the country, and proportionately disabling it to 
sustain the competition of other nations. 

This great question has given rise to the most animated contest 
both of the tongue and the pen; and the obstinate contention of two 
parties, each of which had much of justice on its side, leaves the by- 

* The same author informs us, that, in St. Domingo, a superficial square of 
3403 toises, is reckoned at an average capable of producing 10,000 lbs. weight 
of sugar; and that the total consumption of that commodity in France, taking it 
at the fair average of 20,000,000 Uls. might be raised upon a superficial area of 
seven square leagues. 



CHAP. XVII. ON PRODUCTION. 201 

standers to infer, that neither has chosen to notice the grand cause 
of mischief; that is to say, the necessity of supporting the arrogant 
pretensions of England to universal influence and dominion, by sacri- 
fices out of all proportion to her territorial extent. At all events, 
the great acuteness and intelligence, displayed by the combatants on 
either side, have thrown new light upon the interference of autho- 
rity in the business of the supply of grain, and have tended to 
strengthen the conclusion in favour of commercial liberty. 

The substance of the argument of the prohibitionists may be 
reduced to this; that it is expedient to encourage domestic agricul- 
ture, even at the expense of the consumer, to avoid the risk of star- 
vation by external means; which is seriously to be apprehended on 
two occasions in particular; first, when the power of influence of a 
belligerent is able to intercept or check the import, which might 
become necessary; secondly, when the corn growing countries them- 
selves experience a scarcity, and are obliged to retain the whole of 
their crops for their own subsistence.* 

It was replied by the partisans of free-trade, that if England were 
to become a regular and constant importer of grain, not one, but 
many foreign countries would grow into a habit of supplying her: 
the raising of corn for her market in Poland, Spain, Barbary, and 
North America, would be more extensively practised and the sale of 
their produce would become equally indispensable to them, as the 
purchase would be to England: that even Bonaparte, the most bit- 
ter enemy England had ever encountered, had taken her money for 
the license to export corn: that crops never fail at the same time all 
over the world; and that an extensive commerce of grain v;ould 
lead to the formation of large stores and depots, which will offer the 
best possible security against the recurrence of scarcity; and that, 
accordingly, as they asserted, there are no countries less subject to 
that calamity, or even to violent fluctuations of price, than those that 
grow no corn at all; for which they cited the example of Holland 
and other nations similarly circumstanced.! 

However, it can not be disputed that, even in countries best able 
to reckon on commercial supply, there are many serious inconve- 
niences to be apprehended from the ruin of internal tillage. Sub- 
sistence is the primary want of a nation, and it is neither prudent 
nor safe to become dependent upon distant supply. Admitting that 
laws, which, for the protection of the agricultural prohibit the im- 
port of grain to the prejudice of the manufacturing interest, are both 
unjust and impolitic, it should be recollected that, on the other hand, 
excessive taxation, loans, overgrown establishments, civil, military, 
or diplomatic, are equally impolitic and unjust, and fall more heavily 
upon agriculture than upon manufacture. Perhaps one abuse may 
make another necessary, to restore the equilibrium of production, 

* Malthus. — Inquiry into the Nature and Progress of Rent. Grounds of an 
Opinion^ &c. on Foreign Corn. 
t RiczxdiO.— Essay on the Influence of the Low Price of Corn, &c. 

26 



202 ON PRODUCTION. book i. 

otherwise industry would abandon one branch, and take exclusively 
to another, to the evident peril of the existence of society. (1) 

(1) The question of a free trade in corn is itself of such magnitude and 
importance, that it would not be practicable to discuss it within the compass of 
a note. As our author, however, has in this paragraph intimated at least doubts 
of the superior advantages of entire freedom in the trade in grain, and even 
speaks of the " many serious inconveniences to be apprehended from the ruin 
of internal tillage," and deems it " neither prudent nor safe to become depen- 
dent upon distant supply," it would not be proper to withhold from the reader 
some notice of the labours of the more recent political economists and practical 
inquirers, who have poured a flood of light over this whole inquiry, and satisfac- 
torily demonstrated the entire inexpediency, as well as injustice, of restrictions 
and prohibitions on the importation of foreign corn. 

The first work to which we refer, is the " Essay on the External Corn Trade, 
by R. Torrens, Esq. M.P. F.R.S., fourth edition, London, 1827." It is entitled 
to distinguished notice, as a profound and masterly investigation of the princi- 
ples relating to the trade in grain, and explains the manner in which restrictive 
and prohibitive laws on this subject have contributed to create revulsions and 
embarrassments, from which England has experienced so much suffering in her 
commerce and manufactures. The doctrines unfolded by Colonel Torrens, in 
relation to the foreign trade in corn, have been sanctioned and confirmed by the 
authority of all the principal writers on political economy, who have of late 
directed their attention to the same important topic. He condemns these laws 
as unwise, unjust, and wholly inexpedient. 

Next in order we name Mr James Mill, the author of the " Elements of 
Political Economy," and the " History of British India." In a pamphlet, which 
he published in London, in 1823, entitled an " Essay on the Impolicy of a 
Bounty on the Exportation of Grain, and on the Principles which ought to regu- 
late the Commerce of Grain," he has given a most able examination of these ques- 
tions. He notices most of the arguments urged in favour of restrictions and pro- 
hibitions in the corn trade, and successfully combats them. He, moreover, pre- 
sents many new and luminous views, and discusses the whole subject with a 
fairness and candour that cannot fail to produce conviction in any unprejudiced 
mind. 

Among the numerous works, to which this important subject has given birth in 
England, none has awakened more attention, or had a more extensive circulation 
than the " Catechism on the Corn Laws, by T. Perronet Thompson, of Queen's 
College, Cambridge." It was first published in 1827, and we believe has now 
passed through ten editions. The author has given a candid and complete exhi- 
bition of the fallacies that, from time to time, have been advanced by any writer 
or journalist of celebrity in support of the English corn laws, and has annexed 
to them respectively the most triumphant and conclusive answers. No point at 
issue in the controversy has been left untouched, and every objection to the free- 
dom of trade in grain, we think, removed. 

We must not omit to mention the "Address to the Landowners of England 
on the Corn Laws, by Viscount Milton, (now Earl Fitzwilliam,) published in 
London in 1832." This is an appeal by Lord Fitzwilliam to his fellow proprie- 
tors, for he is said to be one of the largest landowners in England, against the 
course they are pursuing on this great question, and beseeching them, by every 
consideration of their country's peace and welfare, to consent to the abolition of 
what he so satisfactorily proves to be a vicious system. Passing over the anti- 
commercial character of the corn laws and their effects upon the expenses of 
government, he confines himself to exposing the pernicious consequences which 
a high price of corn produces upon the population at large, and upon the opera- 
tions of industrious capitalists, abridging the comforts of the former, frustrating 
the exertions of the latter, and not even promoting the welfare of the agricultur- 
ists themselves. The impartial review this author has taken of the controversy, 
the careful manner in which he has sifted the arguments on either side, and the 



CHAP. XVIII. ON PRODUCTION. 093 



CHAPTER XVIII. 

OP THE EFFECT UPON NATIONAL WEALTH, RESULTING FROM THE 
PRODUCTIVE EFFORTS OF PUBLIC AUTHORITY. 

There can be no production of new value, consequently no in- 
crease of wealth, where the product of a productive concern does 
not exceed the cost of production.* Thus, whether government or 
individuals be the adventurers in the losing concern, it is equally 
ruinous to the nation, and there is so much less value in the country. 

It is of no avail to pretend, that, although the government be a 
loser, its agents, the industrious people, or the workmen it employs, 
have made a profit. If the concern cannot support itself and pay its 
own way, the receipt must fall short of the outlay, and the difierence 
fall upon those, who supply the expenditure of the state; that is to 
say, the tax-payers.t 

* It must not be forgotten, that the consumption of the value of the produc- 
tive agency, exerted in the course of production, is quite as real as that of the 
raw material. And under this term, productive agency, I comprise that of capi- 
tal as well as of human beings. 

f This is equally true, when the government speculates with its own private 
or peculiar funds, as with the produce of the national lands; for whatever is thus 
expended might have gone towards alleviating the public burthens. 

known bias of the order to which he belongs in favour of the corn laws, must 
convince every dispassionate and honest inquirer, that the same process which 
changed his opinions must change theirs. Years may elapse in England, from 
the undue influence of the landed aristocracy in legislation, before these restric- 
tive laws can be repealed; but the force of truth is too great to be resisted very 
long, and must ultimately prevail. 

The last writer we shall refer to is William Jacobs, Esquire, F.R.S., the 
author of the " Tracts relating to the Corn Trade and Corn Laws: including the 
Second Report ordered to be printed by the two Houses of Parliament," pub- 
lished in London, in 1828. Mr. Jacobs has peculiar claims to the reader's atten- 
tion on this subject. He has been for many years devoted to the examination of 
the corn trade, is the Comptroller of Corn Returns, and, from his great'knowledge 
and experience, was selected by the English Board of Trade to proceed to the 
continent, and there carefully examine the actual condition of the agriculture and 
trade in corn of the principal grain-growing countries in the North of Europe. 
This work contains the results of his observations and laborious researches, and 
is entirely a practical view of the past and present state of the trade in corn, sup- 
ported by a variety of curious and entirely authentic documents. In this place 
it would be impracticable to give any detailed account of its great merits as a 
statistical view of the subject; and this is not its only excellence. From the 
comprehensive and careful survey the author took of the actual condition of agri- 
culture and trade in corn, in Europe, lie became thoroughly satisfied of the inex- 
pediency of the corn laws, and declares it to be his delil)erate conviction that the 
fair and lionest trade of speculation in corn should be by law restored, as the only 
means by which the due pri(!C between the producer and consumer can be equita- 
bly adjusted; and he adds, that the destruction of this trade has been the chief 
cause of the depression of the agricultural proprietors both in Kngland and on the 
continent of Europe. 

Amehican EniTOK. 



204 ON PRODUCTION. book i. 

The manufacture of Gobelin tapestry, carried on by the govern- 
ment of France, consumes a large quantity of wool, silk, and dying- 
drugs; furthermore, it consumes the rent of the ground and build- 
ings, as well as the wages of workmen employed; all which should 
be reimbursed by the product, which they are very far from being. 
This establishment, instead of a source of wealth to the nation at 
large, for the government is fully aware of the loss to itself, is, on 
the contrary, a source of perpetual impoverishment The annual 
loss to the nation is the whole excess of the annual consumption of 
the concern, including wages, which are one item of consumption, 
above the annual product. The same may be said of the manufac- 
ture of porcelain at Sevres, and I fear of all manufacturing concerns 
carried on upon account of governments. 

We are told, that this is a necessary sacrifice; that otherwise the 
sovereign would be unprovided with objects of royal bounty and of 
royal splendour. This is no place to inquire how far the munifi- 
cence of the monarch and the splendour of his palaces contribute to 
the good government of the people. I take for granted that these 
things are necessary; yet, admitting them to be so, there is no rea- 
son why the national sacrifices, requisite to support this magnificence 
and liberality, should be aggravated by the losses incurred by a mis- 
direction of the public means. A nation had much better buy out- 
right what it thinks proper to bestow; il; would probably obtain for 
less money an object full as precious; for individuals can always 
undersell the government.* 

There is a further evil attending the productive efibrts of the go- 
vernment; they counteract the individual industry, not of those it 
deals with, for they take good care to be no losers, but of its com- 
petitors in production. The state is too formidable a rival in agri- 
culture, manufacture and commerce; it has too much wealth and 
power at command, and too little care of its own interest. It can 
submit to the loss of selling below prime cost; it can consume, pro- 
duce, or monopolize in very little time so large a quantity of pro- 
ducts, as violently to derange the relative prices of commodities: 
and every violent fluctuation of price is calamitous. The producer 
calculates upon the probable value of his product when ready for 
market; nothing discourages him so much, as a fluctuation that defies 
all calculation. The loss he sufiers is equally unmerited, as the ac- 
cidental gains that may be thrown into his hands. His unmerited 
gains, if any there be, are so much extra charge upon the consumer. 

There are some concerns, I know, which the government must of 
necessity keep in its own hands. The building of ships of war can 

* The same may be observed of commercial enterprises undertaken by the 
public authority. During the scarcity of 1816-17, the French government 
bought up corn in foreign markets; the price of corn rose to an exorbitant rate 
in the home market, and the government resold at a very high rate, although 
somewhat below the average of the market-. Individual traders would have 
found this a very profitable venture; but the government was out of pocket 21 
millions of francs and upv;ards. — Rapport au Roi du 24 Dec. 1818. 



CHAP. XVIII. ON PRODUCTION. 205 

not safely be left to individuals; nor, perhaps the manufacture of 
gunpowder. However, in France, cannon, muskets, caissons, and 
tumbrils are bought of private makers, and seemingly with benefit. 
Perhaps the same system might be further extended. A govern- 
ment must act by deputy, by the intermediate agency of a set of 
people, whose interest is in direct opposition to its own; and they 
will of course attend to their own in preference. If it be so circum- 
stanced as to be invariably cheated in its bargains, there is no need 
to multiply the opportunities of fraud, by engaging itself in produc- 
tion and adventure; that is to say, embarking in concerns, that must 
infinitely multiply the occasions of bargaining with individuals. 

But, although the public can scarcely be itself a successful pro- 
ducer; it can at any rate give a powerful stimulus to individual 
productive energy, by well-planned, well-conducted, and well-sup- 
ported public works, particularly roads, canals, and harbours. 

Facility of communication assists production, exactly in the same 
way as the machinery, that multiplies manufactured products, and 
abridges the labour of production. It is a means of furnishing the 
same product at less expense, which has exactly the same effect, as 
raising a greater product with the same expense. If we take into 
account the immense quantity of goods conveyed upon the roads of 
a rich and populous empire, from the commonest vegetables brought 
daily to market, up to the rarest imported luxuries poured into its 
harbours from every part of the globe, and thence diffused, by means 
of land-carriage, over the whole face of the territory, we shall readily 
perceive the inestimable economy of good roads in the charges of 
production. The saving in carriage amounts to the whole value the 
article has derived gratuitously from nature, if, without good roads, 
it could not be had at all. Were it possible to transplant from the 
mountain to the plain the beautiful forests that flourish and rot 
neglected upon the inaccessible sides of the Alps and Pyrenees, the 
value of these forests would be an entirely new creation of value to 
mankind, a clear gain of revenue both to the landholder and the con- 
sumer also. 

Academies, libraries, public schools, and museums, founded by 
enlightened governments, contribute to the creation of wealth, by 
the further discovery of truth, and the diffusion of what was known 
before; ihus empowering the superior agents and directors of pro- 
duction, to extend the application of human science to the supply of 
human wants.* So likewise of travels, or voyages of discovery, 
undertaken at the public charge; the consequences of which have of 
late years been rendered particularly brilliant, by the extraordinary 
merit of those who have devoted themselves to such pursuits. 

It is observable, too, that the sacrifices made for the enlargement 
of human knowledge, or merely for its conservation, should not be 
reprobated, though directed to objects of no immediate or apparent 
utility. The sciences have an universal chain of connexion. One 

* Supra, Chap. 6. 



206 ON PRODUCTION. book i. 

which seems purely speculative must advance a step, before another 
of great and obvious practical utility can be promoted. Besides, it 
is impossible to say what useful properties may lie dormant in an 
object of mere curiosity. When the Dutchman, Otto Guericke,struck 
out the first sparks of electricity, who would have supposed they 
would have enabled Franklin to direct the lightning, and divert it 
from our edifices, an exploit apparently so far beyond the powers of 
man? 

But of all the means, by which a government can stimulate pro- 
duction, there is none so powerful as the perfect security of person 
and property, especially from the aggressions of arbitrary power.* 
This security is of itself a source of public prosperity, that more than 
counteracts all the restrictions hitherto invented for checking its 
progress. Restrictions compress the elasticity of production; but 
want of security destroys it altogether. (a) To convince ourselves 
of this fact, it is sufiicient to compare the nations of western Europe 
with those subject to the Ottoman power. Look at most parts of 
Africa, Arabia, Persia, and Asia Minor, once so thickly strown with 
flourishing cities, whereof, as Montesquieu remarks, no trace now 
remains but in the pages of Strabo. The inhabitants are pillaged 
alike by bandits and pachas; wealth and population have vanished; 
and the thinly scattered remnant are miserable objects of want and 
wretchedness. Survey Europe on the other hand; and, though she 
is still far short of the prosperity she might attain, most of her king- 
doms are in a thriving condition, in spite of taxes and restrictions 
innumerable; for the simple reason, that persons and property are 
there pretty generally safe from violence and arbitrary exaction. 

There is one expedient by which a government may give its sub- 
jects a momentary accession of wealth, that I have hitherto omitted 
to mention. I mean the robbery from another nation of all its 
movable property, and bringing home the spoil, or the imposition 
of enormous tributes upon its growing produce. This was the mode 
practised by the Romans in the latter periods of the republic, and 
under the earliest emperors. This is an expedient of the same 

* Smith, in his recapitulation of the real causes of the prosperity of Great 
Britain, places at the head of the list, " That equal and impartial administration 
of justice, which renders the rights of the meanest British subject respectable 
to the greatest; and which, by securing to every man the fruits of his own indus- 
try, gives the greatest and most effectual encouragement to every sort of indus- 
try." — Wealth of Nations, b. iv. c. 7. — Poivre, who was a great traveller, tells us, 
that he never saw a country really prosperous, which did not enjoy the freedom 
of industry as well as security of person and property. 

(a) This security is in fact the main duty of all government. Were it not for 
the imperfections of human nature — the propensity of mankind to vice — society 
might exist without government, for no man would injure another. It is to pro- 
tect one against the vices of another that the forms and institutions of society 
are established or supported; thus arming individual right with the aggregate of 
social strength. But the same moral imperfections which drive mankind into 
the bonds of society, undermine and vitiate its institutions. The very engine 
erected to protect, is directed to the injury and spoliation of individuals, and 
becomes occasionally more dangerous than individual wrong. T. 



CHAP. XIX. ON PRODUCTION. 207 

nature, as the acquirement of wealth by individual acts of illegal vio- 
lence or fraud. There is no actual production, but a mere appropri- 
ation of the products of others. I mention this method of acquiring 
wealth, once for all, without meaning to recommend it as either safe 
or honourable. Had the Romans followed the contrary system with 
equal perseverance, had they studied to spread civilization among 
their savage neighbours, and to establish a friendly intercourse that 
might have engendered reciprocal wants, the Roman power would 
probably have existed to this day. 



CHAPTER XIX. 

OF COLONIES AND THEIR PRODUCTS. 

Colonies are settlements formed in distant countries by an elder 
nation, called the mother country. When the latter wishes to enlarge 
its intercourse with a country, already populous and civilized, whose 
territory it has, therefore, no hopes of getting into its own posses- 
sion, it commonly contents itself with the establishment of a factory 
or mercantile residence, where its factors may trade, in conformity 
with the local regulations, as the Europeans have done in China and 
Japan. When colonies shake ofl' their dependence upon the mother 
country, they become substantive and independent states. 

It is common for nations to colonize, when their population 
becomes crowded in its ancient territoriariimits; and when particu- 
lar classes of society are exposed to the persecution of the rest. 
These appear to have been the only motives for colonization among 
the ancients; the moderns have been actuated by other views. The 
vast improvements in navigation have opened new channels to their 
enterprise, and discovered countries before unknown; they have 
found their way to another hemisphere, and to the most inhospitable 
climates, not with the intention of there fixing themselves and their 
posterity, but to obtain valuable articles of commerce, and return to 
their native countries, enriched with the fruits of a forced, but yet 
very extensive production. 

It is worth while to note this difference of motive, which has made 
so marked a difference in the consequences of the two systems of 
colonization. I am strongly tempted to call one the colonial system 
of the ancients, and the other the colonial system of the moderns; 
although there have been many colonies in modern times established 
on the ancient plan, of which those of North America are the most 
distinguished. (a) 

(c) The distinction of the two systems is more imaginary than real. Most of 
the early establishments of the Europeans in the West were made with the view 



208 ON PRODUCTION. book i. 

The production of colonies, formed upon the ancient system, is 
inconsiderable at the commencement; but increases with great rapi- 
dity. The colonists choose for their country of adoption a spot 
where the soil is fertile, the climate genial, or the position advanta- 
geous for commercial purposes. The land is generally quite fresh, 
whether it have been the scene of a dense population long since 
extinguished, or merely the range of roving tribes, too small in 
number and strength to exhaust the productive qualities of the soil. 

Families transplanted from a civilized to an entirely new country, 
carry with them theoretical and practical knowledge, which is one 
of the chief elements of productive industry: they carry likewise 
habits of industry, calculated to set these elements in activity, as 
well as the habit of subordination, so essential to the preservation of 
social order; they commonly take with them some little capital also, 
not in money, but in tools and stock of different kinds: moreover, 
they have no landlord to share the produce of a virgin soil, far 
exceeding in extent what they are able to bring into cultivation for 
years to come. To these causes of rapid prosperity, should, perhaps, 
be superadded the chief cause of all, the natural desire of mankind 
to better their condition, and to render as comfortable as possible the 
mode of life they have adopted. 

The rapid increase of products in colonies, founded upon this plan, 
would have been still more striking, if the colonists had carried with 
them a larger capital; but, as we have already observed, it is not the 
families favoured by fortune that emigrate; those who have the com- 
mand of a sufficient capital to procure a comfortable existence in 
their native country, the scene of their halcyon days of infancy, 
will rarely be tempted to- renounce habits, friends, and relations, to 
embark in what must always be attended with hazard, and encounter 
the inseparable hardships of a primitive establishment. This 
accounts for the scarcity of capital in newly-settled colonies; and is 
one reason why it bears so high a rate of interest there. 

In point of fact, capital is of much more rapid accumulation in 
new colonies than in countries long civilized. It would seem as if 
the colonists, in abandoning their native country, leave behind them 
part of tl^eir vicious propensities; they certainly carry with them 
little of that fondness for show, that costs so dear in Europe, and 
brings so poor a return. No qualities, but those of utilit}'^, are in 
estimation in the country they are going to; and consumption is 
limited to objects of rational desire, which is sooner satisfied than 
artificial wants. The towns are few and small ; the life of agricultur- 
ists, which they must necessarily adopt, is of all others the most 

of absolute migration. The French at St. Domingo, the English at Barbadoes, 
the Spaniards almost universally, settled without the intention of returning home. 
The introduction of negro labour was an after-thought. Slavery was an esta- 
blished practice in all the ancient world, and colonies either made prize of the 
indigenes, or imported slaves from abroad, as soon as they were rich enough 
to buy them. T. 



CHAP. XIX. ON PRODUCTION. 209 

economical; finally, their industry is proportionately more produc- 
tive, and requires a smaller capital to work upon. 

The character of the colonial government usually accords with 
that of individuals; it is active in the execution of its duties, sparing 
of expense, and careful to avoid quarrels; thus there are few taxes, 
sometimes none at all; and, since the government takes little or 
nothing from the revenues of the subject, his ability to multiply his 
savings, and consequently to enlarge his productive capital, is very 
great. With very little capital to begin upon, the annual produce of 
the colony very soon exceeds its consumption. Hence, the astonish- 
ingly rapid progress in its wealth and population; for human labour 
becomes dear in proportion to the accumulation of capital, and it is 
a well-known maxim, that population always increases according to 
the demand.* 

With these data, there is no difficulty in explaining the causes of 
the rapid advance of such colonies. Among the ancients we find 
that Ephesus and Miletus in Asia Minor, Tarentum and Crotona in 
Italy, Syracuse and Agrigentum in Sicily, very soon surpassed the 
parent cities in wealth and consequence. The English colonies in 
North America, which bear the closest resemblance of any in our 
times to those of ancient Greece, present a picture of prosperity less 
striking perhaps, but quite as deserving of notice, and still in the 
attitude of advance. 

It is the invariable practice of colonies founded upon this plan, and 
without any thoughts of returning home, to provide themselves an 
independent government; and even where the mother-country 
reserves the right of legislation, that right will sooner or later be 
dissolved by the operation of natural causes, and matters be brought 
to that footing, on which justice and regard to its real interest should 
have prompted her to put them originally. 

But, to proceed to the colonies formed upon the colonial system 
of the moderns; the founders of them were for the most part ad- 
venturers, whose object was, not to settle in an adopted country, 
but rapidly to amass a fortune, and return to enjoy it in their former 
homes.t 

The early adventurers of this stamp found ample gratification of 
their extravagant rapacity, first in the cluster of the Antilles, in 
Mexico and Peru, and subsequently in Brazil and in the Eastern 
Indies. After exhausting the resources previously accumulated by 
the aborigines, they were compelled to direct their industry towards 
discovering the mines of these new countries, and to turn to account 
the no less valuable produce of their agriculture. Successive swarms 
of new colonists poured in from time to time, animated for the most 

* Vide infra^ under the head of Population, Book II. c. 11. 

+ There have been many exceptions in North America and elsewhere. The 
colonies of Spain and Portugal in the New World were of an ambiguous charac- 
ter. Some of the colonists contemplated a return: others went to establish them- 
selves and their posterity; but the whole plan of them has been subverted, since 
the commencement of the struggle for emancipation. 
27 



210 ON PRODUCTION. book i. 

part with some hope of return, with the desire, not of living in 
affluence upon the land they cultivated, and leaving behind them a 
contented posterity and a spotless name, but of making inordinate 
gain to be afterwards enjoyed elsewhere: this motive led them to 
adopt a system of compulsory cultivation, of which negro slavery 
was the principal instrument. 

But let me ask, in what manner does slavery operate upon pro- 
duction? Is the labour of the slave less costly than that of the free 
labourer? This is an important inquiry, originating in the influence 
of the modern system of colonization upon the multiplication of 
wealth. 

Stewart, Turgot, and Smith, all agree in thinking, that the labour 
of the slave is dearer and less productive than that of the freeman. 
Their arguments amount to this: a man, that neither works nor con- 
sumes on his own account, works as little and consumes as much as 
he can: he has no interest in the exertion of that degree of care and 
intelligence, which alone can insure success: his life is shortened by 
excessive labour, and his master must replace it at great expense: 
besides, the free workman looks after his own support; but that of 
the slave must be attended to by the master; and, it is impossible 
for the master to do it so economically as the free workman, the 
labour of the slave must cost him dearer.* 

This position has been controverted by the following calculation: 
The annual expense of a negro in the West Indies, upon the planta- 
tions most humanely administered, does not exceed 60 dollars: add 
the interest of his prime cost, say at ten per cent, for it is a life in- 
terest; the average price of a negro is about 400 dollars, so that, 
allowing 40 dollars for the annual interest, the whole expense of a 
negro to his owner is but 100 dollars per annum,(a) a sum, doubtless, 
much inferior to the charge of free labour in that part of the world. 
An ordinary free labourer may earn there from a dollar to a dollar 
and a half per day, or even more. Taking the medium of a dollar 
and a quarter, and reckoning but 300 working days in the year, the 
annual wages will amount to 375 instead of 100 dollars.! 

* Stewart (Sir Jas.) Inquiry into the Prin. of Pol. Econ, book ii. c. 607. 
Turgot. Reflections sur la Formation et la Distribution des Richesses,§23. Smith. 
Wealth of Nations^ book i. c. 8; book iii. c. 2. 

■(- It should be observed here, that the free labourers, who are so much better 
paid, are commonly engaged in occupations which, though less laborious, re- 
quire-a greater degree of intelligence and personal skill. Tailors and watch- 
tnakers are generally free men. And the mere existence of slavery itself enhan- 
ces the price of free field labour, by driving all competition out of the market. 



(a) In this calculation no account has been taken of the housing of the negro, 
the tools and implements supplied to him, or the clothing furnished by the 
master; neither does our author seem to make any allowance for the probable 
increase of agricultural production, which free negro labour might afford. Free 
European labour would doubtless be far more expensive, were it practicable. 
The interest of money is also estimated far too low, and the infant and the aged 
must be provided for by the master. T. 



CHAP. XIX. ON PRODUCTION. 2 1 1 

Common sense will tell us, that the consumption of a slave must 
be less than that of a free workman. The master cares not if his 
slave enjoy life, provided he do but live; a pair of trowsers and a 
jacket are the whole wardrobe of the negro: his lodging a bare hut, 
and his food the manioc root, to which kind masters now and then 
add a little dried fish. A population of free workmen, taken one 
w^ith another, has women, children, and invalids to support: the ties 
of consanguinity, friendship, love, and gratitude, all contribute to 
multiply consumption; whereas, the slave owner is often relieved 
by the effects of fatigue from the maintenance of the veteran: the 
tender age and sex enjoy little exemption from labour; and even the 
soft impulse of sexual attraction is subject to the avaricious calcula- 
tions of the master. 

What is the motive which operates in every man's breast to 
counteract the impulse- towards the gratification of his wants and 
appetites? Doubtless, the providential care of the futur.e. Human 
wants and appetites have a tendency to extend — frugality to reduce 
consumption; and it is easy to conceive, that these opposite motives, 
working in the mind of the same individual, help to counteract each 
other. But, where there is master and slave, the balance must needs 
incline to the side of frugality; the wants and appetites operate upon 
the weaker party, and the motive of frugality upon the stronger. 
It is a well known fact, that the net produce of an estate in St. Do- 
mingo cleared off the whole purchase-money in six years; whereas 
in Europe the net produce seldom exceeds the one twenty-fifth or 
one thirtieth of the purchase-money, and sometimes falls far short 
even of that. Smith, himself, elsewhere tells us, that the planters of 
the English islands admit that the rum and molasses will defray the 
whole expenses of a sugar plantation, leaving the total produce of 
sugar as net proceeds: which, as he justly observes, is much the 
same as if our farmers were to pay their rent and expenses with the 
straw only, and to make a clear profit of all the grain. Now I ask, 
how many products are there that exceed the expenses of produc- 
tion in the same degree?(«) 

Indeed, this very exorbitance of profit shows, that the industry of 
the master is paid out of all proportion with that of the slave. To 
the consumer it makes no difference. One of the productive classes 
benefits by the depression of the rest; and that would be all, were it 
not that the vicious system of production, resulting from this de- 
rangement, opposes the introduction of a better plan of industry. 
The slave and the master are both degraded beings, incapable of ap- 
proximating to the perfection of industry, and by their contagion, 
degrading the industry of the free man, who has no slaves at his 

(a) What reference can this inequality have to the relative position of the 
proprietor and the different productive agents one to anotlier? It is a mere 
question of difference of interest of capital. Capital in the West Indies brings 
a return very different, in its ratio, to rent or the profit of land, from what it 
yields in Europe. Land, the source of production, sells cheap, be-^ause of the 
greater unhealthiness of climate, insecurity of tenure, abundance, &c. &c. T, 



212 ON PRODUCTION. book i. 

command. For labour can never be honourable, or even respectable, i 
where it is executed by an inferior cast. The forced and unnatural j 
superiority of the master over the slave, is exhibited in the affecta- 
tion of lordly indolence and inactivity: and the faculties of mind 
are debased in equal.degree; the place of intelligence is usurped by 
violence and brutality. 

I have been told by travellers of veracity and observation, that 
they consider all progress in the arts in Brazil and other settlements 
of America as utterly hopeless, while slavery shall continue to be 
tolerated. Those states of the North American Union, which have 
proscribed slavery, are making the largest strides towards national 
prosperity. The inhabitants of the slave states of Georgia and Caro- 
lina raise the best cotton in the world, but cannot work it up. Dur- 
ing the last war with England, they were obliged to send it over 
land to New York to be spun into yarn. • The same cotton is sent 
back at a vast expense to be consumed at the place of its original 
growth in a manufactured state. (a) This is a just retribution for the 
toleration of a practice, by which one part of mankind is made to 
labour, and subjected to the severest privation, for the benefit of an- 
other. Policy is in this point in accordance with humanity.(6) 

It remains yet to be explained, what are the consequences of the 
commercial intercourse between the colony and the mother country, 
in regard to production; always taking it for granted, that the colony 
continues in a state of dependence, for the moment it shakes off the 
yoke, it has nothing colonial but its origin, and stands in relation to 
the mother-country, on exactly the same footing as any other nation 
on the globe. 

The parent state, with a view to secure to the products of its own 
soil and industry the market of colonial consumption, generally pro- 
hibits the colopist from purchasing European commodities from any 
one else, which enables her own merchants to sell their goods in the 
colony for somewhat more than the}?^ are currently worth. This is 
a benefit conferred on the subjects of the parent state at the expense 
of the colonists, who are likewise its subjects. Considering the 
mother country and the colony to be integral parts of one and the 
same state, the profit and loss balance each other; and this restric- 
tion is nugatory, except inasmuch as it entails the charge of an 

(a) So it is now from Hindustan, where labour is free and most abundant. 
Cotton will flow towards machinery, which has become too powerful for the 
competition of human labour, even where it is the cheapest. That is, therefore, 
not the effect of the toleration of slavery in those states. T. 

(6) Therefore our author has come to this correct conclusion, his reasoning 
is neither logical nor satisfactory ; indeed, the whole of this important subject 
is dismissed with a precipitation little suited to its importance. There are two 
motives of human industry, the hope of enjoyment, and the fear of suflering. 
The slave is actuated principally by the latter, the free agent by the former. 
Neither of these motives should have been thus cursorily adverted to in the 
analysis of actual production, but have been fairly set forth in the outset, imme- 
diately after the detail of the sources of production ; being both of them the 
stimuli which give activity to those sources. After all that our author and 
others have done, much yet remains for the organization of the science. T. 



CHAP. XIX. ON PRODUCTION. 213 

establishment of custom or excise officers; and thus increases the 
national expenditure. 

While, on the one hand, the colonists are obliged to buy of the 
mother country, they are, on the other, compelled to sell their 
colonial produce exclusively to its merchants, who thus obtain an 
extra advantage without any creation of value, at the expense, like- 
wise, of the colonists, by the enjoyment of an exclu&ive privilege, 
and of exemption from competition. Here, too, the profit and loss 
destroy each other nationally, but not individually; what a merchant 
of Havre or Bordeaux gains in this way is substantial profit; but it 
is taken from the pockets of one or more subjects of the same state, 
who had equal right to have their interests attended to. It is true, 
indeed, that the colonists are indemnified in another way; viz. either 
by the miseries of the slave population, as we have already explained; 
or by the privations of the inhabitants of the mother country, as I 
am about to show. 

So completely is the whole system built upon compulsions, re- 
striction, and monopoly, that these very domestic consumers are 
compelled to buy what colonial articles of consumption they require 
exclusively from the national colonies; every other colony, and all 
the rest of the world, being denied the liberty of importing colo- 
nial* produce, or subjected to the payment of a heavy fine, in the 
shape of an import duty. 

It would seem that the home-consumer should at any rate derive 
an obvious benefit, in the price of colonial produce, from his exclu- 
sive right of purchasing of the colonists. But even this unjust pre- 
ference IS denied him; for, as soon as the produce arrives in Europe, 
the home-merchant is allowed to re-export and sell it where he 
chooses, and particularly to those nations that have no colonies of 
their own; so that, after all, the planter is deprived of the competi- 
tion of buyers, although the home-consumer is made to sufier its full 
effect. 

All these losses fall chiefly upon the class of home-consumers, 
a class of all others the most important in point of number, and 
deserving of attention on account of the wide diffusion of the 
evils of any vicious system afiecting it, as well as the functions 
It performs in every part of the social machine, and the taxes it 
contributes to the public purse, wherein consists the power of 
the government. They may be divided into two parts; whereof 
the one is absorbed in the superfluous charges of raising the colonial 
produce, which might be got cheaper elsevvliere;t this is a dead loss 

* Or equinoctial; the term is applied to the ordinary products of equinoctial 

t Foivre, a writer of great information and probity, assures us, that white 
sugar of the best quahty is sold in Cochin China, at the rate of about 3 dollars 
per quintal of the country, which is little more than two cents per pound, and 
that more than 80 millions of pounds are thence exported annnally to China at 
that rate. Adding 300 percent for the charges and profits of trade, which is a 
raost liberal allowance, the sugar of Cochin China might, under a free trade, be 
sold in France at from 8 to 9 cents a pound. 

The English already derive from Asia a considerable quantity both of sugar 



214 ON PRODUCTION. book i. 

to the consumer, without gain to any body. The other part, which 
is also paid by the consumer, goes to make the fortunes of West- 
Indian planters and merchants. The wealth thus acquired is the 
produce of a real tax upon the people, although, being centered in 
few hands, it is apt to dazzle the eyes, and be mistaken for wealth 
of colonial and commercial acquisition. And it is for the protection 
of this imaginary advantage, that almost all the wars of the eigh- 
teenth century have been undertaken, and that the European states 
have thought themselves obliged to keep up, at a vast expense, civil 
and judicial, as well as marine and military, establishments, at the 
opposite extremities of the globe.* 

When Poivre was appointed governor of the Isle of France, the 
colony had not been planted more than 50 years; yet he calcu- 
lated it to have then cost France no less than 12 millions of dollars; 
to be a source of regular and large out-going; and to bring her no 
return of any kind whatsoever.t It is true, that the money spent 
on the defence of that settlement had the further object of uphold- 
ing our other possessions in the East Indies; but, when we find that 
these latter were still more expensive both to the government and 
to the proprietors of the two companies, old and new, it is impossi- 
ble to deny, that all we gained by keeping the Mauritius at this 
enormous expense was, the opportunity of a further waste in Bengal 
and on the coast of Coromandel. 

The same observations will apply to such of our possessions in 
other parts of the world, as were of no importance, but in a military 
point of view. Should it be pretended, that these stations are kept 
up at a great sacrifice, not with the object of gain, but to extend and 
affirm the power of the mother-country, it might yet be asked, why 
maintain them at such a loss, since this power has no other object 
but the preservation of tjie colonies, which turn out to be themselves 
a losing concern? J 

That England has benefitted immensely by the loss of her North 

and indigo, at a cheaper rate than those of the West Indies. And, doubtless, if 
the Europeans were to plant independent and industrious colonies along the 
northern coast of Africa, the culture of equinoctial products there would rapidly 
gain ground, and supply Europe in greater abundance at a still cheaper rate. 

* Arthur Young, in 1789, estimated the annual charge entailed on France, by 
the possession of St. Domingo, at 9 millions of dollars. He has gone into 
detail to prove, that, if the sums spent on her colonies for 25 j^ears only had 
been devoted to the improvement of any one of her own provinces, she would have 
acquired an annual addition of 24 millions of dollars, net revenue, consisting 
of actual products, without loss to any body. Vide his Journey in France. 

f CEuvres de Poivre, p. 209. In this estimate he takes no account of the charge 
of the military and marine establishment of France herself, of which a part 
should be set down to the colony. 

:i^ Vide the works of Benjamin Franklin, vol. ii. p. 50, for the opinion of that 
celebrated man, who had so much experience in these matters. I find it stated 
in the Travels of Lord Valentia that the Capeof Good Hope, in 1802, cost Eng- 
land an excess of from 1,000,000 to 1,200,000 dollars per annum above its own 
revenue. 



\ 



CHAP. XIX. ON PRODUCTION. 215 

American colonies, is a fact no one has attempted to deny.* Yet she 
spent the incredible sum of 335,000,000 dollars in attempting to retain 
possession; a monstrous error in policy indeed; for she might have 
enjoyed the same benefits, that is to say, have emancipated her colo- 
nies, without expending a sixpence; besides saving a profusion of 
gallant blood, and gaining credit for generosity, in the eyes of 
tiurope and posterity.! 

The blunders committed by the ministers of George TIL, during 
the whole course of the first American war, in which, indeed, they 
were unhappily abetted, by the corruption of the parliament and the 
pride of the nation, were imitated by Napoleon, in his attempt to 
reduce the revolted negroes of St. Domingo. Nothing but its dis- 
tance and maritime position prevented that scheme from proving 
equally disastrous with the war of Spain. Yet, comparatively, the 
independence of that fine island might have been made equally pro- 
ductive of commercial benefit to France, as that of America had been 
to England. It is high time to drop our absurd lamentations for the 
loss of OUT colonies, considered as a source of national prosperity. 
For, in the first place, France now enjoys a greater degree of pros- 
perity, than while she retained her colonies; witness the increase of 
her population. Before the revolution, her revenues could maintain 
but twenty-five millions of people: they now support thirty-two 
millions and a half, (1831)(1). In the second place, the first princi- 

* " Bristol was one of the chief entrepots of North American commerce. Her 
principal merchants and inhabitants joined in a most energetic representation to 
parliament, that their city would be infallibly ruined by the acknowjedo-ment of 
American independence; adding, that their port would be so deserted, as^not to be 
worth the charge of keeping up. Notwithstanding their representations, peace 
became a matter of necessity, and the dreaded separation was consentexi to 
1 en years had scarcely elapsed after this event, when the same worthy persons 
petitioned the parliament for leave to enlarge and deepen the port, which 
instead of being deserted, as they had apprehended, was incapable of receiving 
the influx of additional shipping, that the commerce of independent America had 
given birth to." De Levis, Letlres Ckhioises. 

tk t These remarks are not altogether applicable to the British dependencies in 
the i.ast; because there the nation is rather a conqueror than a colonist, havino- 
the domination over thirty-two millions of inhabitants, and the absolute disposal 
ot the revenue levied upon them. But the clear national profits derived from the 
acquisition is by no means so considerable, as may be generally supposed; for 
the charges of administration and protection must be deducted. Colquhoun, in 
his Jreatise on the Wealth, Fewer, and Resources of the British Empire, which 
gives an exaggerated picture of them, states the total revenue of the sovereign 
company, at 18,051,478/. sterling; and its expenditure at 16,984,271/.; leaving a 
surplus of 1,067,207/. ^ 

In all probability were India in a state of national independence, the commerce 
between her and Great Britain would increase so much, as to produce to the lat- 
ter an additional revenue, larger than the amount of that surplus, to say nothino- 
of the increase of individual profits. ° 

(1) The population of France, notwithstanding the interruption to industry, 
and the drains occasioned by the long wars, has increased since the commence- 
ment of the Revolution. According to calculations made by the National Assem- 
bly in 1791, France contained 26,363,074 inhabitants, and in 1831 it contained 



216 ON PRODUCTION. book i. 

pies of political economy will teach us, that the loss of colonies by no 
means implies a loss of the trade with them. Wherewith did France 
before buy the colonial products? with her own domestic products to 
be sure. Has she not since continued to buy them in the same 
way, though sometimes of a neutral, or even an enemy? 

I admit, that the ignorance and vices of her rulers for the time 
being have made her pay for those products much dearer than she 
need have done; but now that she buys them at the natural price, 
(exclusive, of course, of the import duties,) and pays for them as 
before with her domestic products, in what way is she a loser? 
Political convulsions have given a new direction to commerce; the 
import of sugar and coffee is no longer confined to Nantes and Bor- 
deaux; and those cities have suffered in consequence. But, as 
France now consumes at least as much of those articles as she ever 
did, all, that has not come by the way of Nantes or Bordeaux, must 
needs have found its way in some other channel. France can not 
have bought in any other way, than as of old, with the products of 
her own land, capital, and industry ; for, excepting robbery and piracy, 
one nation has no other means of buying of another. Indeed, France 
might have benefitted largely by the trade, which has supplanted her 
own colonial commerce, had not old prejudices and erroneous 
notions constantly opposed the natural current of human affairs. 

Perhaps it may be argued, that the colonies furnish commodities 
which are no where else to be had. The nation, therefore, that 
should have no share of territories so highly favoured by nature, 
would lie at the mercy of the nation that should first get possession; 
for the monopoly of purchasing the colonial produce would enable 
her to exact her own price from her less fortunate neighbour. Now 
it is proved beyond all doubt, that what we erroneously call colonial 
produce, grows every where within the tropics, where the soil is 
adapted to its cultivation. The spices of the Moluccas are found to 
answer at Cayenne, and probably by this time in many other places; 
and' no monopoly was ever more 'complete, than the trade of the 
Dutch in that commodity. They had sole possession of the only 
spice islands, and allowed nobody else to approach them. Has Eu- 
rope been in any want of spices, or has she bought them for their 
weight in gold? Have we any reason to regret the not having de- 
voted two hundred years of war, fought a score of naval battles, and 
sacrificed some hundreds of millions, and the liVes of half a million 
of our fellow creatures, for the paltry object of getting our pepper 
and cloves cheaper by some two or three soufi a pound? And this 
example, it is worth while to observe, is the most favourable one 
for the colonial system, that could possibly be selected. One can 
hardly imagine the possibility of monopolizing sugar, a staple pro- 
duct of most parts of Asia, Africa, and America, so completely as 

32,560,000 within the same limits. The annual increase is about 200,000 indi- 
viduals. ( Vide Annuaire pour VAn 1834.) 

American Editor. 



CHAP. XX. ON PRODUCTION. 217 

the Dutch did the spice trade; yet has this very trade been snatched 
from the avaricious grasp of the monopolist nation, ahuost without 
firing a shot. 

The ancients, by their system of colonization, made themselves 
friends ail over the known world; the moderns have sought to make 
subjects, and therefore have made enemies. Governors, deputed by 
the mother country, feel not the slightest interest in the diffiision of 
happiness and real wealth amongst a people, with whom they do not 
propose to spend their lives, to sink into privacy and retirement, or 
to conciliate popularity. They know their consideration in the 
mother country will depend upon the fortune they return with, not 
upon their behaviour in office. Add to this the large discretionary 
power, that must unavoidably be vested in the deputed rdlers of 
distant possessions, and there will be every ingredient towards the 
composition of a truly detestable government. 

It is to be feared, that men in power, like the rest of mankind, 
are too little disposed to moderation, too slow in their intellectual 
progress, embarrassed as it is at every step by the unceasing 
manoeuvres of innumerable retainers, civil, military, financial, and 
commercial; all impelled, by interested motives, to present things 
in false colours, and involve the simplest questions in obscurity, to 
allow any reasonable hope of accelerating the downfall of a system, 
which for the last three or four hundred years must have wonder- 
fully abridged the inestimable benefits, that mankind at large, in all 
the five great divisions of tlie globe,"" have, or ought to have derived 
from the rapid progress of discovery, and the prodigious impulse 
given to human industry since the commencement of the sixteenth 
century. The silent advances of intelligence, and the irresistible 
tide of human affairs will alone effect its subversion. 



CHAPTER XX. 

OP TEMPORARY AND PERMANENT EMIGRATION, CONSIDERED IN RE- 
FERENCE TO NATIONAL WEALTH. 

When a traveller arrives in France, and there spends 2000 dol- 
lars, it must not be supposed that the whole sum is clear profit to 
France. The traveller expends it in exchange for the values he 
consumes: the effect is just the same, as if he had remained abroad 
and sent to France for what he wanted, instead of coming and con- 
suming it here; and is precisely similar to that of international com- 

* The vast continent of New Holland, with its surrounding islands, is now 
generally considered bjf geographers as a distinct portion of the globe, under the 
denomination of Australia or Australasia, which has been given to it on account 
of its position exclusively within the southern hemisphere. 

28 



218 ON PRODUCTION. book i. 

merce, in which the profit made is not the whole or principal value 
received, but a larger or smaller per centage upon that principal, 
according to the circumstances. 

The matter has not hitherto been viewed in this light. In the 
firm conviction of this maxim, that metal money was the only item 
of real wealth, people imagined, that, if a foreigner came amongst 
them with 2000 dollars in his pocket, it was so much clear profit to 
the nation; as if the tailor that clothes him, the jeweller that fur- 
nishes him with trinkets, the victualler that feeds him, gave him no 
values in exchange for his specie, but made a profit equal to the total 
of their respective charges. All that the nation gains is the profit 
upon its dealings with him, and upon what he purchases: and this 
is by no means contemptible, for every extension of commerce is a 
proportionate advantage;* but it is well to know its real amount, 
that we may not be betrayed into the folly of purchasing it too 
dearly. An eminent writer upon commercial topics, tells us, that 
theatrical exhibitions cannot be too grand, too splendid, or too 
numerous; for that they are a kind of traffic wherein France re- 
ceives all and pays nothing; a proposition which is the very reverse 
of truth; for France pays, that is to say, loses, the whole expense of 
the exhibition, which is productive of nothing but barren amuse- 
ment, and leaves no value whatever to replace what has been con- 
sumed on it. Fetes of this description may be very pleasant things 
as affording amusement, but must make a ridiculous figure as a specu- 
lation of profit and loss. What would people think of a tradesman, 
that was to give a ball in his shop, hire performers, and hand re- 
freshments about, with a view to benpfit in his business? Besides, 
it may be reasonably doubted, whether a fete or exhibition of the 
most splendid kind, does in reality occasion any considerable influx 
of foreigners. Such an influx would be much more powerfully 
attracted by commerce, or by rich fragments of antiquity, or by 
master-pieces of art nowhere else to be seen, or by superiority of 
climate, or by the properties of medicinal waters, or, most of all, by 
the desire of visiting the scenes of memorable events, and of learn- 
ing a language of extensive acceptation. I am strongly inclined to 
believe, that the enjoyment of a few empty pleasures of vanity has 
never attracted much company from any great distance. People 
may go a few leagues to a ball or entertainment, but will seldom 
make a journey for the purpose. It is extremely improbable, that 
the vast number of Germans, jflnglish, and Italians, who visit the 
capital of France in time of peace, are actuated solely by the desire 

* A strange country has some advantages over the traveller, and its deal- 
ings with him may be considered as lucrative; for his ignorance of the lan- 
guage and of prices, and often a spice of vanity, make him pay for most of 
the objects of his consumption above the current rate. Besides, the public 
sights and exhibitions, which he there pays for seeing, are expenses already 
incurred by the nation, which he nowise aggravates by his presence. But 
these advantages, though real and positive, are very limited in amount, and 
must not be over-rated. 



CHAP. XX. ON PRODUCTION. 219 

of seeing the French opera at Paris. That city has fortunately 
many worthier objects of general curiosity. In Spain, the bull- 
fights are considered very curious and attractive; yet I cannot think 
many Frenchmen have gone all the way to Madrid to witness that 
diversion. Foreigners, that have already come into the country on 
other accounts, are, indeed, frequent spectators of such exhibitions; 
but it was not solely with this object that they first set out upon their 
journey, (a) 

The vaunted fetes of Louis XIV. had a still more mischievous 
tendency. The sums spent upon them were not supplied by foreign- 
ers, but by French provincial visiters, who often spent in a week, as 
much as would have maintained their families at home for a year. 
So that France was two ways a loser; first, of the sums expended 
by the monarch, which had been levied on the subjects at large; 
secondly, of all that was spent by individuals. The sum total of 
the consumption was thrown away, that a fevv tradesmen of the 
metropolis might make their profits upon it; which they would 
equally have done, had their industry and capital taken a more 
beneficial direction. 

A stranger, that comes into a country to settle there, and brings 
his fortune along with him, is a substantial acquisition to the nation. 
There is in this case an accession of two sources of wealth, industry 
and capital: an accession of full as much value, as the acquirement 

(«) This has become a matter of some interest to England, whose unpro- 
ductive capitalists and proprietors have absolutely overwhelmed the society of 
France and a great part of Italy, where they consume an immense revenue, 
derived from Britain by the export of her manufactures without any return. 
Thus their native country is, pro tanfo, a producer without being a consumer — 
the scene of exertion but not of enjoyment. This circumstance, although 
nowise prejudicial to her productive powers, is extremely so to the comfort and 
enjoyment and content of her population; for there are few enjoyments so per- 
sonal and selfish, as not to be diffused In some degree or other at the moment 
and place of consumption. Besides, the presence of the proprietor is always a 
benefit, especially in Great Britain, where so many public duties are gratuitously 
performed. Ireland suffers in a worse degree; her gentry are attracted by 
England as well as the continent; and the consequences have long been matter 
of regret and complaint. Though it might be impolitic to check the efflux by 
authoritative measures, it should at least not be directly encouraged and stimu- 
lated, as it really is, by the financial system, which the English ministry so 
obstinately persevere in. Almost the whole of the taxation is thrown immedi- 
ately upon consumption; whilst the permanent sources of production and the 
clear rent they yield to the idle proprietor are left untouched. The proprietor has, 
therefore, an obvious interest in effecting his consumption where it is least bur- 
thened with taxation ;' that is to say, any where but in England. His property 
is protected gratuitously, and the charge of its protection defrayed by the pro- 
ductive classes, who thus are compelled to pay for the security of other people's 
property as well as their own, and are themselves unable to imitate their unpro- 
ductive countrymen, by running away from domestic taxation. A more unjust 
and discouraging system could not have been devised. Its evils are daily 
increasing, and Threaten the most serious diminution of the national resources. 
But the ministers neither see the mischief themselves, nor will listen to the 
warnings of others. Many of them, indeed, have an interest in perpetuating an 
exemption, by which they benefit personally. T. 



220 ON PRODUCTION. book i. 

of a proportionate extension of territory; to say nothing of what is 
gained in a moral estimate, if the emigrant bring with him private 
virtue and attachment to the place of his adoption. " When Fre- 
derick William came into the regency," says the royal historian of 
the house of Brandenburgh, " there was in the country no manufac- 
ture of hats, of stockings, of serge, or woollen stuff of any kind. 
All these commodities were derived from French industry. The 
French emigrants introduced amongst us the making of broadcloths, 
baizes and lighter woollens, of caps, of stockings wove in the frame, 
of hats, of beaver and felt, as well as dying in all its branches. Some 
refugees of that nation established themselves in trade, and retailed 
the products of their industrious countrymen. Berlin soon could 
boast of its goldsmiths, jewellers, watch-makers, and carvers; those 
of the emigrants, that settled in the low country, introduced the 
cultivation of tobacco, and of garden fruits and vegetables, and by 
their exertions converted the sandy tract in the environs into capital 
kitchen-garden grounds." 

This emigration of industry, capital, and local, attachment, is no 
less a dead and total loss to the country thus abandoned, than it is a 
clear gain to the country affording an asylum. It was justly ob- 
served by Christina, queen of Sweden, upon the revocation of the 
edict of Nantes, that Louis XIV. had used his right hand to cut off 
his left. 

Nor can the calamity be prevented by any measures of legal 
coercion. A fellow-citizen cannot be forcibly retained, unless he 
be absolutely incarcerated; still less can he be prevented from ex- 
porting his movable property, if he be so inclined. For, putting 
out of the question the channel of contraband, which can neVer be 
closed altogether, he may convert his effects into goods, whose ex- 
port is tolerated or even encouraged, and consign, or cause them to 
be consigned, to some correspondent abroad. This export is a real 
outgoing of value; but how is it possible for government to ascer- 
tain, that it is intended to be followed by -no return?* 

The best mode of retaining and attracting mankind is, to treat 
them with justice and benevolence; to protect every one in the en- 
joyment of the rights he regards with the highest reverence; to 
allow the free disposition of person and property, the liberty of con- 
tinuing or changing his residence, of speaking, reading, and writing 
in perfect security. 

Having thus investigated the means of production, and pointed 
out the circumstances, that render their agency more or less prolific, 

* In 1790, when the new authorities of France indemnified the holders of 
suppressed offices in paper-money, these discarded functionaries for the most 
part converted their assignats into specie, or other commodities of equal value, 
which they took or sent out of the country. The consequent national loss to 
France was nearly as great, as if they had received their indemnities in cash; 
for its paper representative had not then suffered any material depreciation. 
Even when the individual remains himself in the country, he can not be pre- 
•vented from transferring his fortune thence, if he be determined on so doing. 



CHAP. XXI. ON PRODUCTION. 



221 



It wou d be endless, as well as foreign to my subject, to attempt a 
general review of all the various products that compose the wealth 
ol mankmd: such a task would furnish materials for many distinct 
treatises. Uut there is one amongst these products, the uses and 
nature of which are very imperfectly known, although the know- 
ledge of them would throw much light upon the matter now under 
discussion: for which reason I have determined, before the conclu- 
sion ot this part of my work, to give a separate consideration to the 
product money, which acts so prominent a part in the business of 
production, in the character of the principal agent of exchange and 



CHAPTER XXI. 

OP THE NATURE AND USES OF MONEY. 

Section I. 
General Remarks. 

In a society ever so little advanced in civilization, no single in- 
dividual produces all that is necessary to satisfy his own wants- and 
It IS rarely that an individual, by his single exertion, creates even 
any single product; but even if he does, his wants are not limited to 
that single article; they are numerous and various, and he must 
therefore, procure all other objects of his personal consumption, by 
exchangmg the overplus of the single product he himself creates be- 
yond his own wants, for such other products as he stands in need of 
And, by the way, it is observable, that, since individual producers* 
in every line, keep for their own use but a very small part of their 
own products; the gardener, of the vegetables he raises, the baker, 
ot the bread he bakes, the shoemaker, of the shoes he makes, and so 
ot all others; the great bulk, nay, almost the whole of the products 
ol every community, arrive at consumption by the medium of ex- 
change. 

This is the reason, why it has been erroneously concluded, that 
exchange and transfer are the basis and origin of the production of 
wealth, and of commerce in particular; whereas they are only 
secondary and accessory circumstances; inasmuch as, were each 
family to raise the whole of the objects of its own consumption, as 
we see practised in some instances in the back settlements of the 
United States, society might continue to exist, without a single act 
of exchange or transfer. I make this remark, merely with a view 
to correctness of first principles, without any design to detract from 



222 ON PRODUCTION. book i. 

the importance of exchange and transfer to the progressive advance- 
ment of production; indeed, I set out with the position, that they 
are indispensable in an advanced stage of civilization. 

Admitting, then, the necessity of interchange, let us pause a mo- 
ment, and consider, what infinite confusion and difficulty must arise 
to all the different component members of society, who are for the 
most part producers of but a single article, or two or three at the 
utmost, but of whom even the poorest is a consumer of a vast num- 
ber of different products; I say, what difficulty must ensue, were 
every one obliged to exchange his own products specifically for 
those he may want; and were the whole of this process carried on 
by a barter in kind. The hungry cutler must offer the baker his 
knives for bread; perhaps, the baker has knives enough, but wants 
a coat; he is willing to purchase one of the tailor with his bread, but 
the tailor wants not bread, but butcher's meat; and so on to infinity. 

By way of getting over this difficulty, the cutler, finding he can- 
not persuade the baker to take an article he does not want, will use 
his best endeavours to have a commodity to offer, which the baker 
will be able readily to exchange again for whatever he may happen 
to need. If there exist in the society any specific commodity that 
is in general request, not merely on account of its inherent utility, 
but likewise on account of the readiness with which it is received in 
exchange for the necessary articles of consumption, and the facility 
of proportionate subdivision, that commodity is pi'ecisely what the 
cutler will try to barter his knives for; because he has learnt from 
experience, that its possession will procure him without any diffi- 
culty by a second act of exchange, bread or any other article he may 
wish for. 

Now money is precisely that commodity. 

The two qualities, that give a general preference of value, in the 
shape of the current money of the country to the same amount of 
value in any other shape, are: — 

1. The aptitude, in the character of an intermedial object of ex- 
change, to help all who have any exchange or any purchase to make, 
that is to say, every member of the community, towards the specific 
object of desire. The general confidence, that money is a com- 
modity acceptable to every body, inspires the assurance of being 
able, by one act of exchange only, to procure the immediate object 
of desire, whatever it may be; whereas, the possessor of any other 
commodity can never be sure that it will be acceptable to the pos- 
sessor of that particular object of desire. 

2. The capability of subdivision and precise apportionment to the 
amount of the intended purchase; which capability is a recom- 
mendation to all who have purchases to make; in other words, to 
every member of the community. Every one is, therefore, anxious 
to barter for money the product whereof he holds a superfluity, and 
which is commonly that he himself produces; because, in addition 
to the other quality above stated, he feels sure of being able to buy 
with its value in that shape as small or as large a portion of cor- 



CHAP. XXI. ON PRODUCTION. 223 

responding value, as he may require; and because he may buy, 
whenever, and wherever he pleases, such objects as he may desire 
to have in lieu of the product he has ^old originally. 

In a very advanced stage of civilization, when individual wants 
have become various and numerous, and productive operations very 
much subdivided, exchanges become a matter of more urgent neces- 
sity, as well as much more frequent and more complicated; and 
personal consumption and barter in kind becomes less practicable. 
For instance, if a man makes not the whole knife, but the handle of 
it only, as in fact is the case in towns where cutlery is conducted on 
a large scale, he does not produce any thing that he can turn to ac- 
count; for what could he do with the handle without the blade? He 
can not himself consume the smallest pai't of his own product, but 
must unavoidably exchange the whole of it for the necessaries or 
conveniences of life, for bread, meat, linen, &c. But neither baker, 
butcher, nor weaver, can ever stand in need of an article, that is fit 
for nobody but the finishing cutler, who cannot himself give either 
bread or meat in exchange; because he produces neither; and who 
must, therefore, give some one commodity, that, by the custom of 
the countiy may be expected to pass currently in exchange for most 
others. 

Thus, money is the more requisite, the more civilized a nation is, 
and the further it has carried the division of labour.(a) Yet history 
contains precedents of considerable states, in which the use of any 
specific article, as money, was utterly unknown; as we ai'e told it 
was among the Mexicans at the time of the discovery. We are in- 
formed, that, just about the period of their conquest by the Spanish 
adventurers, they were beginning to employ grains of cacao as 
money, in the smaller transactions of commerce.* 

I have referred to custom, and not to the authority of govern- 
ment, the choice of the particular article that is to act as money in 
preference to every other: for though a government may coin what 
it pleases to call crowns, it does not oblige the subject to give his 
goods in exchange for these crowns, at least not where property is 
at all respected. Nor is it the mere impression, that makes people 
consent to take this coin in exchange for other products. Money 
passes current like any other commodity; and people may at liberty 
barter one article for another in kind, or for gold in bars, or silver 
bullion. The sole reason why a man elects to receive the coin in 
preference to every other article, is, because he has learnt from ex- 

* Ranal Hist. phil. et pol. lib. vi. 

(a) The utility of money is intense, in the compound ratio of the division of 
labour and the variety of individul consumption. A sugar colony in the West 
Indies, though highly productive in proportion to its population, requires little 
money to facilitate the transfer of the produce; because the bulk of the population, 
the negroes, have very little variety of consumption: they are fed, clothed, &c. 
in the wholesale, and in the plainest and most uniform manner. Yet, possibly, 
the division both of agricultural and manufacturing labour on each plantation 
may be carried to considerable length. T. 



224 ON PRODUCTION. book i. 

perience, that it is preferred by those whose products he has occa- 
sion to purchase. Crown pieces derive their circulation as money 
from no other authority than this spontaneous preference: and if 
there were the least ground for supposing, that any other commodity, 
as wheat, for instance, would pass more currently in exchange for 
what they calculate upon wanting themselves, people would not give 
their goods for crown pieces, but would demand wheat, which would 
then be invested with all the properties of money. And this has 
occurred occasionally in practice, where the authorized or govern- 
ment money has consisted of paper destitute of credit or public 
confidence. 

Custom, therefore, and not the mandate of authority, designates 
the specific product that shall pass exclusively as money, whether 
crown pieces or any other commodity whatever.* 

The more frequent recurrence of the exchange of every individual 
product for the commodity, money, than for any other product, has 
attached particular names to this transaction; thus, to receive money 
in exchange is called, selling, and to give it, buying. 

In this way originated the use of money. These positions are by 
no means purely speculative; for on them must all arguments, and 
laws, and regulations, on the subject of money, be grounded. A 
system built upon any other foundation can possess neither beauty 
nor solidity, and must fail to fulfil the object of its construction. 

With the view of throwing the utmost possible light upon the 
essential properties of money, and the principal contingencies it is 
subject to, I shall treat of these particulars in separate sections, and 
endeavour to enable such as may give me their attention, to follow 
with ease the chain of connexion, notwithstanding that classification; 
and themselves to arrange in one comprehensive view the whole 
play of the mechanism, and the causes of that derangement, which 
human folly or misfortune may occasionally efiect. 



Section II. 
Of the Material of Money. 

If, as it would appear by the reasoning in the preceding section, 
money be employed as a mere intermedial object of exchange be- 

* When the intercourse between the Europeans and the negroes of the river 
Gambia first commenced, the commodity most in request with them was iron, 
for the purposes of war and of tillage. Iron, therefore, became the standard of 
comparison of value. In a little time, it became a mere nominal standard in 
their mercantile dealings ; and a bar of tobacco consisting of 20 or 30 leaves of 
that herb, was given for a bar of rum consisting of four or five pints, according 
to the abundance or scarcity of the article. In such a state of society, each 
product successively performs the functions of money in reference to all other 
products; which leaves the community subject to all the inconveniences of bar- 
ter in kind, the chief of which is, the inability to offer any one article in general 
request and acceptation, and capable of ready apportionment in amount to other 
commodities at large. Vide Travels of Mungo Park, vol. i. c. 2. 



CHAP. XXI. ON PRODUCTION. 225 

tween an object in possession and the object of desire, the choice of 
Its material is of no great importance. Money is not desired as an 
object of food, of household use, or of personal covering, but for the 
purpose of re-sale, as it were, and re-exchange for some object of 
utdity, after having been originally received in exchange for one 
such already. Money is, therefore, not an object of consumption; 
It passes through the hands without sensible diminution or injury; 
and may perform its office equally well, whether its material be gold 
or silver, leather or paper. 

Yet, to enable it to execute its functions, it must of necessity be 
possessed of inherent and positive value; for no man will be content 
to resign an object possessed of value, in exchange for another of 
less value, or of none at all. 

There are some other less essential requisites, which add to its 
efficiency. A material, wherein these are not combined, is unfit for 
the purpose, and cannot hope to engross its functions either generally 
or permanently. 

We are told by Homer, that the armour of Diomede had cost nine 
oxen. A warrior, that wished to arm himself at half the price, must 
have been puzzled to pay four oxen and a half Wherefore, the 
article employed as money must be capable of being readily and 
without injury apportioned to the different objects of desire, and 
subdivided in such manner, as to admit of exchanges of the exact 
amount required. 

Again, we read, that in Abyssinia, they make use of salt for mo- 
ney. If the same custom prevailed in France, a man must take a 
mountain of salt to market to pay for his weekly provisions. Where- 
fore, the commodity employed as money must not be so abundant, 
as to make it necessary to transfer a large quantity, on each recurring 
act of exchange. 

At Newfoundland, it is said, that dried cod performs the office of 
money; and Smith makes mention of a village in Scotland, where 
nails are made use of for that purpose.* Besides many other incon- 
veniences, that substances of this nature are subject to, there is this 
grand objection, that the quantity may be enlarged almost at plea- 
sure, and in a very short space of time, and thereby a vast fluctuation 
effected in their relative value. But who would readily accept in 
exchange an article, that might, perhaps, in a few moments lose the 
half or three-fourths of its value? Wherefore, the commodity em- 
ployed as money must be of such difficult acquisition, as to ensure 
those who take it, from the danger of sudden depreciation. 

In the Maldive islands, and in some parts of India and Africa, 
shells, called cowries, are employed as money, although they have 
no intrinsic value, except that they serve for ornament to some rude 
tribes. This kind of money would never do for nations that carry 
on trade with many parts of the globe; a medium of exchange of 
such very limited circulation would offer insuperable objections. It 

* Wtulth of Nations, book i. c. 4. 
29 



226 ON PRODUCTION. book i. 

is natural for people to receive most willingly in exchange that arti- 
cle, which is the most universally received in like manner by other 
people in their turn. 

We need not, then, be surprised, that almost all the commercial 
nations of the world should have selected metal to perform the office 
of money; when once the more industrious and commercial com- 
munities had declared their choice, all the rest had an evident in- 
ducement to follow their example. 

At times, when the metals now most abundantly produced were 
yet rare,' people were content to make use of them for the purpose. 
The legal currency of Lacedsemon was of iron; that of the early 
Romans of copper. In proportion as those metals were extracted 
from the earth in greater quantity, they became liable to the objec- 
tion above stated in respect to all products of too little comparative* 
value; and it is long since the precious metals, that is to say, gold 
and silver, have been almost universally adopted. To this use they 
are particularly applicable: 

1. As being divisible into extremely minute portions, and capable 
of re-union, without any sensible loss of weight or value; so that 
the quantity may be easily apportioned to the value of the article of 
purchase. 

2. The precious metals have a sameness of quality all over the 
world. One grain of pure gold is exactly similar to another, whe- 
ther it came from the mines of Europe or America, or from the 
sands of Africa. Time, weather, and damp, have no power to alter 
the quality; the relative weight of any specific portion, therefore, 
determines at once, its relative quantity and value to every other 
portion: two grains of gold are worth exactly twice as much as one. 

3. Gold and silver, especially with the mixture of alloy, that they 
admit of, are hard enough to resist very considerable friction, and 
are therefore fitted for rapid circulation, though, indeed, in this re- 
spect, they are inferior to many kinds of precious stones. 

4. Their rarity and consequent dearness is not so great that the 
quantity of gold or of silver, equivalent to the generality of goods, 
is too minute for ordinary perception; nor, on the other hand, are 
they so abundant and cheap, as to make a large value amount to a 
great weight. It is possible, that in progress of time, they rnay be- 
come liable to objection on this score; especially if new and rich 
veins of ore should be discovered: and then mankind must have 
recourse to platina, or some other yet unknown metal, for the pur- 
pose of currency. 

Lastly, gold and silver are capable of receiving a stamp or impress- 
ion, certifying the weight of the piece, and the degree of its purity. 

* The money of Lacedsemon is a proof of the position, that public authority- 
is competent of itself to give currency to its money. The laws of Lycurgus 
directed the money to be made of iron, purposely to prevent its being easily 
hoarded, or transferred in large quantities ; but they were inoperative, because 
they went to defeat these, the principal purposes of money. Yet no legislator 
was ever more rigidly obeyed than Lycurgus. 



CHAP. XXI. ON PRODUCTION. 227 

Although the precious metals used for money have generally 
some mixture of baser metal, generally of copper, by way of alloy, 
the value of the baser metal, thus incorporated, is reckoned for no- 
thing. Not that the alloy is itself destitute of value; but because 
the operation of disuniting it from the purer metal would cost more 
than it would be worth, after it was extracted. For this reason a 
piece of coined gold or silver, mixed with alloy, is estimated by the 
quantity of precious metal only contained in it.* 

* The present silver coin of France contains one part copper to nine parts 
fine silver; the relative value of copper to silver being as 1 to 60, or thereabouts; 
So that the copper contained in the whole silver coinage, amounts to about 
1-600 of the total value of the silver coin, or 1 cent in 6/r. Supposing it were 
attempted to disengage the copper, it would not pay the expenses of the process 
of separation ; to say nothing of the value of the impression that must be 
destroyed. Wherefore, it is reckoned for nothing in the valuation of the coin. 
A piece of 5/r. presents the idea of the 23 1-2 grammes of fine silver contained 
in it, though actually weighing 25 ^r. inclusive of the alloy. (1) 

(1) The values of the gold, silver, and copper coins of the United States, 
were first regulated by the act of Congress of the 2d of April, 1792, establish- 
ing the mint. By that act, the eagle contained 247.5 grains of pure gold and 
22.5 grains of alloy, making together 270 grains of standard gold ; and the 
half eagle and the quarter eagle, their respective fractional proportions of the 
same metals. By the act of Congress of the 30th of June, 1834, this standard 
has been debased, and the weight of the gold coins reduced: the eagle now 
contains 232 grains of pure gold and 2G grains of alloy, making together 258 
grains of standard gold; and the half eagle and the quarter eagle are reduced 
in like proportions. By the act of 1792, the standard of gold was eleven- 
twelfths of pure gold to one-twelfth of alloy, or 22 carats fine. By the act of 
the present year, the relative fineness or number of carats has been reduced to 
about 21.58, equivalent to a debasement of about 1.9 per cent; and the actual 
quantity of pure metal in the coin has been diminished more than 6.25 per 
cent — (6.262626+). The alloy of standard gold is composed of silver and 
copper, not exceeding one half silver. 

In the silver coins of the United States, no change has been made, since the 
act of 1792, which regulated their value. The dollar, by that act, is made the 
unit, of the same value as the Spanish milled dollar then current. The dollar 
of the United States contains 371.25 grains of pure silver and 416 grains of 
standard silver; the half dollar 185.625 grains of pure silver and 208 grains of 
standard silver; the quarter dollar 92.8125 grains of pure silver and 104 grains of 
standard silver; the dime 37.125 grains of pure silver and 41.6 grains of stan- 
dard silver; and the half dime 18.5625 grains of pure silver and 20.8 grains of 
standard silver. The standard of silver is 1485 parts of fine to 179 parts alloy; 
accordingly, 1485 parts in 1664 parts of the entire weight of the silver coins are 
of pure silver, and the remaining 179 parts of alloy. The alloy of standard silver 
is wholly composed of copper. 

The copper coins of the United States are the cent and the half cent : the weight 
of which, since the act of 1792, has been twice reduced. By the act of 1792, 
the cent contained 264 grains, and the half cent 132 grains, of copper, and the 
cent was fixed at the value of the hundredth part of the dollar, or unit. By an 
act of the 14th of .Tanuary, 1793, the cent was reduced to 208 grains, and the 
half cent to J04 grains, of copper; and by an act of the 3d of March, 1795, the 
president was authorized by proclamation, nnd accordingly, on the 26th of Ja- 
nuary, 1796, reduced the cent to 168 grains, and the half cent to 8 1 grains of cop- 
per, their present weight. Tlie proportional mint value ot gold to silver, by the 
act of 1792, was as 1 of pure gold to 15 of pure silver; and by the act of 



228 ON Production. book i. 



Section III. 

Of the Accession of Value a Commodity receives by being Vested 
with the Character of Money. 

From the foregoing sections it will appear, that money is indebted 
for its currency, not to the authority of the government, but to its 
being a commodity bearing a peculiar and intrinsic value. But its 
preference, as an object of exchange, to all other commodities of 
equivalent value, is owing to its characteristic properties as money; 
and to the peculiar advantage it derives from its employment in that 
character; namely, the advantage of being in universal use and re- 
quest. The whole population, from the lowest degree of poverty to 
the highest of wealth, must effect exchanges, must buy the objects 
of want, must be consumers of money; or, in other words, must 
obtain possession of the commodity, that acts as the medium of ex- 
change, the commodity generally admitted to be best suited, and 
most frequently employed for that purpose. A man that has any 
other commodity, jewels, for instance, to ofier in exchange for the 
necessaries or luxuries he may have occasion for, cannot get those 
necessaries or luxuries by the process of exchange, until he has 
found a consumer for his jewels; nor can he even then be sure, that 
such a consum.er will be able to give him in return, the very identi- 
cal article he may want: whereas, a man, with money in his pocket, 
is quite certain, that it will be acceptable to the person, of whom he 
would buy any thing; because that person will, in turn, be himself 
obliged to become a purchaser in like manner.* With the com- 
modity, money, he can obtain all he wants by a single act of ex- 
change only, called a purchase; whereas, with all others two acts at 
least are necessary; a sale and a purchase. This is the sum total of 
its advantages in the character of money: but it must be obvious to 
every body, that the preference, thus shown it as money, is a con- 
sequence of its actual use as such. 

I must here observe, that the adoption of any specific commodity 
to serve as money, considerably augments its intrinsic value, or 
value as an article of commerce. A new use being discovered for 
the commodity, it unavoidably becomes more in request; the em- 
ployment of a great part, the half or perhaps three-fourths of the 
whole stock of it on hand, in this nrew way cannot fail to render the 
whole more scarce and dear, (a) 

* The other property of money, the capability of subdivision, and apportion- 
ment of the value parted with, must not be lost sight of: by it the jeweller is 
enabled to exchange a minute portion of his precious commodity for the smallest 
item of his household expenditure. 



(a) This point has been v^ell observed upon by Turgoi. llefi. stir la Form, et 
Distrib. des Rich. 

the present year the proportional mint value of gold to silver is as 1 of pure gold 
to 16.002112-1- of pure silver. American Editor. 



CHAP. XXI. ON PRODUCTION. 229 

Were the actually existing stock of silver and gold applied to 
other use, than the fabrication of plate or ornament, the quantity 
would be abundant and much cheaper than it is at present; that is to 
say, whenever they were exchanged for other commodities, more 
of them would be given or received in proportion to the value ob- 
tained in exchange. But a large portion of these metals being 
destined to act as money, and exclusively occupied in that way, 
there is less remaining to be manufactured into jewellery and plate, 
and the scarcity of course adds to the value. On the other hand, if 
they were never used in plate or jewellery, there would be more of 
them applicable to the purpose of money, and money would grow 
cheaper, that is to say, more of it would be necessary to purchase 
an equal quantity of goods. The employment of the precious 
metals in manufacture makes them scarcer and dearer as money; in 
like manner as their employment as money makes them scarcer and 
dearer in manufacture.* 

Hence it naturally follows, that these metals being, by reason of 
their employment as money, raised to such a price, as precludes 
their so general use in the form of plate and jewellery, it is in con- 
sequence found less convenient to use them in that form. The 
luxury costs more than it is worth. Thus, massive gold plate has 
gone completely out of fashion, particukrly in those countries, where 
the activity of commerce, and the rapid progress of wealth, make 
gold in great demand for the purposes of money. The richest in- 
dividuals content themselves with gilt plate, that is to say, plate 
covered with a very thin coat of gold; solid gold is used only in 
smaller articles of manufacture, and those in which the value of the • 
workmanship exceeds that of the metal. In England, plate is made 
very light, and people of affluence often content themselves with 
silver-plated goods. The ostentation of displaying a large service 
of that metal costs the interest of a considerable capital. 

The increase of the value of metals is, generally speaking, at- 
tended with some disadvantages; inasmuch as it places many arti- 
cles of comfort and convenience, silver dishes, spoons, &c., beyond 
the reach of most private families; but there is no disadvantage in 
such increased value of the metal in its character of money; on the 

* Ricardo and some other writers maintain, that the charges of obtaining the 
metal wholly determine its price or relative value in exchange for all other com- 
modities. According to their notions, therefore, the want or demand nowise 
influences that price; a position in direct contradiction to daily and indisputable 
experience, which leads us invariably to the conclusion, that value is increased 
by increase of demand. Supposing that, by the discovery of new mines, silver 
were to become as common as copper, it would be subject to all the disqualifica- 
tions of copper for the purposes of money, and gold would be more generally 
employed. The consequent increase of the demand for gold would increase the 
intensity of its value; and mines would be worked, that are now abandoned, be- 
cause they do not defray the expense. It is true that the ore would then be ob- 
tained at a heavier rate; but will any one deny, that the increased value of the 
metal would be owing to the increased demand for it? It is the increased inten- 
sity of that demand, that determines the miner to incur the increased charge of 
production. 



230 ON PRODUCTION. book i. 

contrary, there is a greater convenience in the transfer of a less 
bulky commodity, on every change of residence, and every act of 
exchange. 

The selection of any commodity, to act as money in but one part 
of the world, increases its value every where else. There is no 
doubt, that, if silver should cease to be current as money in Asia, 
the value of that metal in Europe would be affected, and more of it 
would be given in exchange for all other commodities; for one use 
of silver in Europe is, the possibility of exporting it to Asia. 

The employment of the precious metals as money by no means 
renders their value stationary; they remain subject to local as well 
as temporary fluctuations of value, like every other object of com- 
merce. In China, half an ounce of silver will purchase as many 
objects of use or pleasure as an ounce in France; and an ounce of 
silver in France will generally go much farther in the purchase of 
commodities, than it will in America. Silver is more valuable in 
China than in France, and in France than in America. 

Thus money, or specie, as some people call it, is a commodity, 
whose value is determined by the same general laws, as that of all 
other commodities; that is to say, rises and falls in proportion to the 
relative demand and supply. And so intense is that demand, as to 
have sometimes been sufficient to make paper, employed as money, 
equal in value to gold of the same denomination; of which the mo- 
ney of Great Britain is a present example. 

It must not be imagined, that the paper money of that country 
derives its value from the promise of payment in specie, which it 
purports to convey. That promise has been held out ever since the 
suspension of cash payments by the bank in 1797, without any 
attempt at performance, which many people consider impossible.* 

* Before the Bank of England can pay off its notes in cash, the government, 
its principal debtor, must discharge its debts in specie ; which it can not do unless 
it purchase the specie, either wiih its savings, or with the proceeds of further 
taxation. Iri doing so, it would, in effect, substitute a new and very costly en- 
gine of circulation, which must be purchased by the state, for the present one, 
which, although much out of order, and altogether destitute of intrinsic value, is 
yet made to do the business well enough. (1) 

(1) The Bank of England, notwithstanding the opinion expressed by the author 
in this note, has long since resumed and continued the payment of its notes on 
demand in specie; and, it must be added, without any intention having been 
expressed, or attempt made, by the British government, to " discharge its debts in 
specie," which M. Say seemed here to think must be previously effected. 

By an act of parliament, passed in July 1819, generally known as Mr. Peel's 
Act, the Bank of England was required, from the 1st of May, 1823, to pay its 
notes on demand, in the legal coins of the realm. The final resumption of cash 
payments by the bank of England took place, however, at a still earlier period ; 
for, finding itself in possession of sufficient gold to make payments in cash sooner 
than this law prescribed, the bank obtained the passage of another act, which 
made it imperative upon the institution to pay all demands in the legal coin of 
the realm on the 1st of May, 1822, since which time it has never ceased to "dis- 
charge its debts in specie" when req^iired. 

American Editor. 



CHAP. XXI. ON PRODUCTION. 231 

Gold is only procurable piece-meal, and by payment of an agio or 
per centage; in other words, Ijy giving a larger amount in paper for 
a smaller amount in gold. Yet the paper, though depreciated, is 
invested with value far exceeding that of its flimsy material. Whence, 
then, is that value derived? From the urgent want, in a very ad- 
vanced stage of society and of industry, of some agent or medium 
of exchange. England, in its actual state, requires, for the effectua- 
tion of its sales and purchases, an agent or medium equal in value, 
say to 1,284,000 lbs. w^eight of gold; or, what is the same thing, to 
1,200,000,000 lbs. weight of sugar; or, what is still the same thing, 
to 60,000,000/. sterling of paper, taking the Bank of England paper 
at 30 millions, and the paper of the country banks at as much more.(cr.) 
This is the reason, why the 60 millions of paper, though destitute 
of intrinsic value, are, by the mere want of a medium of ex- 
change, made equal in value to 1,284,000 lbs. weight of gold, or 
1,200,000,000 lbs. weight of sugar. 

As a proof that this paper has a peculiar and inherent value, 
when its credit was the same as at present, and its volume or nominal 
amount was enlarged, its value fell in proportion to the enlargement, 
just like that of any other commodity. And, as all other commodi- 
ties rose in price, in proportion to the depreciation of the paper, its 
total value never exceeded the same amount of 1,284,000 lbs. weight 
of gold, or, 1,200,000,000 lbs. weight of sugar. Why? Because the 
business of circulating all the values of England required no larger 
value. No government has the power of increasing the total national 
money otherwise than nominally. The increased quantity of the 
whole reduces the value of every part; and vice versa.* 

Since the national money, whatever be its material, must have a 
peculiar and inherent value, originating in its employment in that 
character, it forms an item of national wealth, in the same manner, 
as sugar, indigo, wheat, and all the other commodities that the nation 
may happen to possess.! It fluctuates in value like other commodi- 

* For the consequenccof an excessive issue of paper-money, vide infra, Cha]p. 
XXII. sect. 4. where the subject of paper-money is discussed. 

I The muhiplication of paper-money, and its consequent depreciation, effects 
no augmentation of the vveahh of the community, although it makes necessary a 
more Uberal use of figures in the estimation; just in the same way as its valua- 
tion in wheat instead of silver would do. The total of national wealth might be 
20,000,000,000 kilugr. of wheat, and but 25,000,000 kilugr. of silver, and yet the 
value precisely the same. If the value of the money be less intense, it will re- 
quire more of it to express the same degree of value. 

(a) It must not be supposed, that our author is ignorant of the wide difference 
between Bank of England and country bank paper, viz : that the one is paper- 
money, the principal ; the other, its convertible representative. This position 
is perfectly correct. The credit, embodied, as it were, in the provincial paper, 
is equally an agent of circulation with the inconvertible principal, the paper- 
money ; which, but for its presence and rivalry would be required in double the 
quantity, to maintain the same scale of money-prices. Great confusion has 
hitherto prevailed on this subject for want of a clear conception of the concurrent 
operation of coin and its rival, credit. T. 



232 ON PRODUCTION. book i. 

ties; and like them, too, is consumed, though less rapidly than most 
of them. Wherefore, it would be wrong to subscribe to the opinion 
of Garnier,(a) who lays it down as a maxim, that, " so long as sil- 
ver remains in the shape of money, it is not an item of actus! wealth 
in the strict sense of the word; for it does not directly and imme- 
diately satisfy a want or procure an enjoyment." There are abun- 
dance of values incapable of satisfying a want, or procuring an 
enjoyment in their present existing shape. A merchant may have 
his warehouse full of indigo, which is of no use in its actual state, 
either as food or as clothing; yet it is nevertheless an item of 
wealth, and one that can be converted at will, into another value fit 
for immediate use. Silver, in the shape of crown pieces, is, therefore, 
equally an article of wealth with indigo in chests. Besides, is not 
the utility of money an object of desire in civilized society? 

Indeed, the same writer elsewhere admits that, " specie in the 
coffers of an individual is real wealth, an integral part of his substance, 
which he may immediately devote to his personal enjoyment; 
although, in the eye of political economy, this same coin is a mere 
instrument of exchange, essentially differing from the wealth it helps 
to circulate."* I hope what I have said is quite sufficient to show 
the complete analogy of specie to all other items of wealth. What- 
ever is wealth to an individual, is wealth to the nation, which is but 
an aggregate of many individuals; and is wealth also in the eye of 
political economy, which must not be misled by the notion of imag- 
inary value, or regard as value any thing, but what all the members 
of the community, individually, as well as jointly, treat as value, not 
nominal, but actual. And this is one proof more, and there are not 
two kinds of truth in this, more than in any other science. What is 
true in relation to an individual, is true iu' relation to the govern- 
ment, and to the community. Truth is uniform; in the application 
only can there be any variety. 



Section IV. 
Of the Utility of Coinage, and of the Charge of its Execution. 

No mention has hitherto been made of the value that money 
derives from the impression and coinage. I have merely pointed 
out the various utility of gold and silver as articles of commerce, 
wherein originates their value; and considered their fitness to act as 
money, as part of that utility. 

Wherever gold and silver act as money, they must of course be 
constantly passing from hand to hand. Most people buy or sell 

* Jlhrege des Principes di'Economie Puhlique, 1 repartie. c. 4, and the advertise- 
ment prefixed. 



(«) Gamier de Saintes, translator of the Wealth of Nations. 



CHAP. XXI. ON PRODUCTION. 233 

several times a day; judge, then, what inconvenience must ensue, 
were it necessary to be always provided with scales to weigh the 
money paid or received; and what infinite blunders and disputes 
must arise from awkwardness or defective implements. Nor is this 
all; gold and silver can be compounded with other metals without 
any visible alteration. The degree of purity can not be exactly 
ascertained, without a delicate and complex chemical process. The 
transactions of exchange are wonderfully facilitated, when the weight 
and standard of each piece of money is denoted by an impression 
that nobody can mistake. 

Metals are reduced to an. established standard, and divided into 
pieces of an established weight, by the art of coining. 

The government of each state usually reserves to itself the exclu- 
sive exercise of this branch of manufacture; whether with a view of 
gaining somewhat more by the monopoly, than it could, if every- 
body were at libert)'^ to pi'actise it, or to hold out to the subjects a 
more solid security, than any private manufacturer could ofier, which 
is more frequently the motive. In fact, though governments have 
too often broken faitli in this particular, tlieir guarantee is still pre- 
ferred by the people to that of individuals, both for the sake of 
uniformity in the coin, and because there would probably be more 
difficulty in detecting the frauds of private issuers. 

The coinage unquestionably adds a value to the metal coined; that 
is to say, a lump of silver, wrought into a dollar, is better than an 
equal weight of bullion of like standard; and for a very simple rea- 
son. The fashion given to the metal saves the person, that takes it 
in course of exchange, all the charges of weighing and assaying, 
among which the loss of time and labour must be reckoned; just in 
the same manner as a coat ready made is worth more than the 
materials it is to be made of. Even if the business ofcoining were open 
to all the world, and government confined itself to fixing the stand- 
ard, the weight, and the impression, that each piece should possess, 
still the holders of bullion would find it answer to pay a premium to 
the coiner, for coining their bullion into money; otherwise, they 
would have some difficulty in effecting an exchange, and would, 
perhaps, lose more on the exchange, than it would cost to have the 
bullion converted into coin. 

But the additional value, thus communicated to the precious 
metals by the coinage, must not be confounded with that, which 
bullion, as an article of trade, receives from the circumstance of its 
employment as money. The latter value attaches to the whole stock 
of gold and silver in existence; a silver tankard is of greater value, 
because that metal is employed as money, whereas, the additional 
value accruing from the coinage is peculiar to the specific portion 
coined, exactly as its fashion is peculiar to the goblet; and is wholly 
independent of the value, that the commodity, silver, derives from 
its various utility. 

In England, the whole expense of coinage is defrayed by the 
government; the same weight of guineas is delivered at the mint in 
30 



234 ON PRODUCTION. book i. 

return for a like weight of bullion of the legal standard. The 
nation, in quality of consumer of money, is gratuitously presented 
with the charges of coining, which are levied by taxation upon them 
in their other character of payers of taxes. Yet gold, in the shape 
of guineas, has an evident advantage over bullion; not that of being 
ready weighed, for people are often at the pains of re-weighing, but 
that of being ready assayed. Consequently, it has happened some- 
times, that bullion has been carried to the mint, not to be converted 
into coin, but merely to have the standard ascertained, and certified 
to the foreign or domestic purchaser.(a) For guineas are a better 
article of export than bullion, inasmuch as bullion, bearing the cer- 
tificate of assay, is preferable to bullion without any such certificate. 
On the contrary, for the purposes of importation into England, gold 
bullion answers every purpose of guineas ready coined, and is of 
just the same value, weight and standard being alike; for the mint 
makes no charge for converting the bullion into coin. Foreigners 
have, in fact, an object in keeping back the guineas, which have 
already received the certificate of assay, and remitting bullion to 
England to obtain a like gratuitous certificate. This system, there- 
fore, makes it an object to export the coined metal, but holds out no 
encouragement to its reimportation.* 

The mischief is somewhat palliated by an accidental circumstance, 
which never entered into the calculation of the legislature. There 
is no other mint in England, but that of the metropolis, which is so 
completely overloaded with business, that it can not re-deliver the 

* It is hardly necessary to repeat, that the specie exported is not so much 
value lost to the community; for nobody will feel inclined to make a present of 
it to the foreigner. Its value is transmitted, for the purpose of obtaining a cor- 
responding value in return; but the nation loses the value of the coinage in this 
operation. When guineas are exported from England, she receives in exchange 
the value of the metal only, and nothing for the impression it bears.(6) 

(a) That is to say, to receive the certificate of coinage, for use, not in the cha- 
racter of money, but as an article of commerce. The assay is charged for at the 
English mint, upon bullion re-delivered without coinage. And, before the 
export of coin was made free,the risk was probably equal to the value of the cer- 
tificate conferred by coinage. These remarks apply to the coinage of gold only, 
silver being now subject to a seignorage of 4s. in 66s. But silver is no longer 
the material of the metallic money, except for minute and fractional exchanges. 

T. 

(A) This is hardly true to the full extent. The Spanish dollars pass current 
in many countries at a considerable advance on bullion of equal weight and fine- 
ness, and constitute the legal currency of some communities, that have not under- 
taken the business of coinage themselves ; as in Hayti, and elsewhere. The 
difference is the local value of the coinage, which is paid for sometimes very 
liberally. But to whom is it paid 1 to the Spanish individual or to the Spanish 
government. If to the former, it is an undue advantage to the individual at the 
expense of the community ; if to the latter, it is the recompense of productive 
agency. Were the gold coinage of England subject to a seignorage like the 
silver, it would never be exported habitually, but to such nations as were con- 
tent to pay the extra value of the coinage. Indeed, our author presently says in 
express terms, that the value of the coinage is not always lost on exportation. 

T. 



I 



CHAP. XXI. ON PRODUCTION. 235 

metal coined till many weeks, and often months, after it is brought 
for coinage.* The consequence is, that the owner, who leaves his 
bullion to be coined, loses the interest of its value during the whole 
time it remains in the mint. This operates as a small tax on coin- 
age, and raises the value of the coin somewhat above that of bullion. 
For it is manifest, that the value would be exactly the same, if 
bullion and guineas were taken without distinction, weight for 
weight. 

So much for the effect of the English regulations on this head. 

All the other governments of Europe, if I mistake not, derive from 
the coinage a revenue more than equal to the charges of the process.! 
The exclusive privilege of issuing money which they have most 
properly engrossed, together with the severe penalties denounced 
against private coiners, would enable them to raise the profit of the 
business very high by the limitation of their issues; for the value of 
money, like that of every thing else, is always in the direct ratio to 
the demand, and in the inverse ratio to the supply. 

In fact when silver in the shape of coin is so rare and dear, that 
18 dollars in coin will purchase the weight of 20 dollars of equal 
fineness in the shape of bullion, it is an indication that the public 
attaches the same value to 15 oz. 12 dvvt. of coined, as to 17 oz. 6 
dwt. 16 grs. of uncoined metal. Wherefore, the government can, 
by its coinage, in such case, give to 9 dollars, the value of 10 dollars, 
and make a profit of 10 per cent. But, if the coin become more 
abundant, and more of it be necessary in exchange for bullion, it 
may perhaps be necessary to give 95 dollars in coin for the weight 
of 100 dollars in bullion: in which latter case, the government can 
make a profit of no more than 5 per cent upon the purchase and 
conversion of bullion into coin. 

If, in the latter case, the government, with a view to increase the 
ratio of its profit, instead of purchasing bullion itself, were simply 
to charge a seignorage, say of 10 per cent upon the bullion brought 
to the mint for coinage, none at all would be .brought for that pur- 
pose by individuals, who would have to pay 10 per cent for an 
operation, which added 5 per cent only to the value of the metal. 
Thus the mint would have nothing to coin either on public or private 
account; and the government would find a high ratio of profit incom- 
patible with an extended amount of coinage. 

* Wealth of Nations, book i. c. 5. 

-j- One of my German translators, the learned Professor Morstadt, of Heidel- 
berg, has observed upon this passage, that since 1810, the Russian government 
has made no charge for the coinage. It might with equal reason execute gra- 
tuitously the business of letter-carriage, instead of charging for it to the indivi- 
duals. 

I am perhaps incorrect in saying, that most governments make a profit over 
and above the expense of execution.. The French government charges a seigno- 
rage, equal at most to defray the expense of the mere process. But the interest 
and wear and tear of the capital vested in buildings, machinery, &c. and the 
charge of administration, &c. are so much dead loss to the government; and 
probably many other governments are in the same predicament. 



236 ON PRODUCTION. book i. 



Whence it may be concluded, that the duty or seignorage upon 
coinage, which has been so frequently discussed, is an absolute 
nullity; for that governments can not fix their own ratio of profit 
upon the execution of the coinage, but that it must depend upon the 
state of the bullion market, which again is regulated by the relative 
supplies of coined and uncoined metal, and the demand for them at 
the time being. 

It is to be observed, that, to the public at large, in its capacity of 
consumer of coined bullion, it is a matter of perfect indifference, 
whether the coin be dear or cheap; for, so long as its value is not 
subject to sudden fluctuations, it will pass current for as much as it 
has been taken for. 

When the coinage of money is not executed gratuitously, and 
especially when it is paid for at a monopoly-price, it is a matter of 
perfect indifference to the state, whether or not its coin be melted 
down or exported, for it can neither be melted down or exported, 
without having first paid the coinage in full, which is all that is lost 
by melting or exportation.* On the contrary, the export of such 
coin is quite as advantageous as that of any other manufactured com- 
modity whatever. It is a branch of the bullion trade; and unques- 
tionably, a coin, so well executed as to be diflBcult to counterfeit, 
accurate in the weight and assay, and charged with a moderate duty 
on the coinage, may acquire a currency in different parts of the 
world, and yield the government, that issues it, a profit of no con- 
temptible amount. 

Witness the gold ducats of Holland, which are in request through- 
out all the north of Europe at a higher rate than their intrinsic value 
as bullion; and the dollars of Spain, which are all coined at Lima 
and Mexico, and have been executed with so much regularity and 
integrity, as to pass current as money not only all over Spanish 
America, but likewise in the United States and in several parts of 
Europe, Africa, and Asia.t 

The Spanish dollar is a remarkable instance of the value attached 
to the metal by the process of coinage. When the Americans of the 
Union determined on a national coinage of dollars, they contented 
themselves with simply re-stamping those of the Spanish mint, with- 
out varying their weight or standard. But the piece thus re- 
stamped would not pass current with the Chinese, and other Asiatics, 
at the same rate; 100 dollars of the United States would not pur- 
chase so much of other commodities as 100 dollars of Spain. The 
American Eecutive, nevertheless, continued to deteriorate the coin 
by giving it a handsome impression, apparently wishing to avail 

* The value of the coinage, or fashion of the metal, is not always lost in the 
export. The impression is, to a certain degree, a recommendation beyond the 
limits of the authority which executes it, and raises the value somewhat higher 
than that of bullion in bars. 

t The 5 fr. pieces of France, have, by their invariable uniformity of weight 
and standard since their first issue, acquired a similar currency in many parts of 
the world. 



1 



CHAP.xxT. ON PRODUCTION. 237 

itself of this method of checking the export of specie to Asia. For 
this purpose it was directed, that all exports of specie should be 
made in dollars of its own coinage, hoping in this way to make the 
exporters give a preference to the domestic products of its own ter- 
ritory. Thus, after wantonly depreciating the Spanish dollar, with- 
out prejudice, it is true, to the specie remaining current within the 
territory of the Union, it went on further to enjoin its use in the 
least profitable way, viz. in the commercial intercourse with those 
nations that set the least value on it. The natural course would 
have been, to suffer the value exported to go out of the country in 
the form, that might offer the prospect of the largest returns. Self- 
interest might have been safely relied on in this particular.(l) 

But what are we to think of the wisdom of the Spanish govern- 
ment, which was enabled by the confidence in its good faith in the 
execution of its coinage, to export dollars with a profit, and sell them 
abroad at an advance upon their intrinsic value; and yet thought fit 
to prohibit so advantageous a traffic, which would have furnished a 
vent to a product of the national soil, worked up by domestic indus- 
try for an ample recompense? 

Though a government be the exclusive coiner of money, and is 
by no means bound to coin gratuitously, it can not with justice 
deduct the expense of coinage from its payments, in discharge of its 
own contracts. If it has engaged to pay a million, say for supplies 
advanced, it can not honestly say to the contractor: " We bargained 
to pay a million, but, we pay you in specie just coined; and there- 
fore shall deduct 20,000 dollars, more or less, for the charges of 
coinage.^' In fact, all pecuniary engagements, contracted by govern- 
ment or individuals, virtually imply a promise to pay a given sum, 
not in bullion but in coin. The act of exchange, wherein the bar- 
gain originated, is effected with the implied condition, on behalf of 
one of the contracting parties, to give a commodity somewhat more 
valuable than silver bullion; namely, silver in crown pieces, or coin 
of some denomination or other. The virtual contract of a govern- 
ment is to pay in coined money; and since, in consequence of that 
implied condition, it obtains a greater quantity of goods, that will, 
if the bargain be to pay him in bullion. In this instance, it offers 
the charge of coinage into the bargain at the time of concluding the 
contract, and thereby obtains better terms, than if it is in the habit 
of paying in bullion. 

The charges of coinage should be deducted from the metal brought 

(1) This paragraph contains three errors in relation to the coinage of dollars 
by the United States, and the exportation of specie, which it is of importance to 
point out: 1st. Spanish dollars are not, and never have been, simply restamped at 
our mint, without varying their weight or standard : 2d. A pound, troy, of Spa- 
nish dollars, contains 10 oz. 15 dwts. of fine silver: A pound, troy, of American 
dollars contains 10 oz. 14 dwts. 5 grains of line silver: 3d. No law has ever 
been enacted by Congress, directing the exportation of specie to be made in dol- 
lars of our own coinage ; nor has the executive the power to regulate, or in any 
manner interfere with the exportation of specie from the United States. 

American Editor. 



238 ON PRODUCTION. book i. 

to the mint to be coined, at the time of its re-delivery in a coined 
state. 

These considerations lead us to the necessary conclusions, — that 
the manufacture of bullion into a coin increases the value of the 
metal, in the ratio of the additional convenience resulting to the com- 
munity, from the circumstance of coinage, and not an item further, 
whatever charges or duties the state may attempt to saddle it with ;^ 
that a government by monopolizing the business of coining, may 
make a profit to the whole extent of this accsssion of value; that it 
can not possibly advance this profit any further, in its discharge of 
engagements, fairly and freely entered into; and that it can not do 
so with regard to prior engagements, without committing an act of 
partial bankruptcy. 

Moreover, it is evident that, in all dealings between individuals, 
the public authority has still less power, by means of the impression 
of its die, to make the commodity, acting as money, pass for more 
than its intrinsic value, plus the value added by the fashion it 
receives. Vain will be any enactment, that the stamp impressed 
shall give to an ounce of silver a specific or determinate value; it 
will never buy more goods than an ounce of silver, bearing that 
impression, is worth at the time being. 



Section V. 
Of Alterations of the Standard Money. 

The first thing to be observed on this head is, that the public 
authority has generally taken upon itself to fix arbitrarily the com- 
modity, that shall serve as money. This assumption, on its part, has 
little inconvenience in itself; for the interests of the nation and of 
the ruling power happen to be exactly the same. Should a govern- 
ment attempt to force an ill-adapted medium into circulation, it would 
sustain a loss itself on every bargain, and the people would, by 
degrees, adopt some other medium. Thus, the first issue of coined 
money among the Romans was by their King Numa, and his coin- 
age was of copper, which at that time of day was the properest metal 
for the purpose; for, before the time of Numa, the Romans knew no 
other money but copper in bars. On the same principle, modern 
governments have made choice of gold and silver, which would 
undoubtedly have been selected by the general accord of individuals 
without the interference of their rulers. 

But the sovereign power, being firmly persuaded that its mandate 

* In Spanish America, a higher duty is charged, amounting, according to Hum- 
holdt, to 11 1-2 per cent on silver, and 3 per cent on gold, over and above the ac- 
tual charges of coinage; for the sovernment allows no bullion to be exported in 
an uncoined state. So that, in fact, this is not a seignorage, but a duty on ex- 
portation, exacted at the time of converting the bullion into coin. 



CHAP. XXI. ON PRODUCTION. 239 

was necessary and competent to invest any commodity whatever 
with the currency of money, succeeded in impressing its subjects 
with the same notion during the darker ages, and that too at the very 
time that individuals, with a view to personal interest, were acting 
upon principles diametrically opposite; for, whoever was dissatisfied 
with the authorized money, either abstained from selling altogether, 
or disposed of his goods in some other way. 

This error led to another of much more serious mischief, that has 
overset all order whatever. 

The public authority persuaded itself, that it could raise or depress 
the value of money at pleasure; and that on every exchange of goods 
for money, the value of the goods adjusted itself to the imaginary 
value, which it pleased authority to affix to it, and not to the value 
naturally attached to the agent of exchange, money, by the conflict- 
ing influence of demand and supply. 

Thus, when Philip I. of France, adulterated the livre of Charle- 
magne, containing 12 oz. of fine silver,* and mixed with it a third 
part alloy, but still continued to call it a livre, though containing but 
S oz. of fine silver, he was nevertheless fully persuaded, that his 
adulterated livre was worth quite as much as the livre of his prede- 
cessors. Yet it was really worth 1-3 less than the livre of Charle- 
magne. A livre in coin would purchase but 2-3 of what it had done 
before. However, the creditors of the monarch, and of individuals, 
got paid but2-3of their just claims; land-owners received from their 
tenants but 2-3 of their former revenue, till the renewal of leases 
placed matters on a more equitable footing. Abundance of injustice 
was committed and authorized : but, after all, it was impossible to 
make 8 oz. of fine silver equal to 12.t 

In the year 1113, the livre, as it was still called, contained no more 
than 6 oz. of fine silver. At the commencement of the reign of Louis 
VII. it had been reduced to 4 oz. St. Louis gave the name of livre 
to a quantity of silver weighing but 2 oz. or 6 gros. 6 grains.J At 
the era of the French revolution, the money bearing that name 
weighed only the 1-6 of an oz.; so that it had been reduced to 1.72 
of its original standard of weight or quality in the days of Charle- 
magne. 

I take no notice, at present, of the great fall experienced in the 
relative value of fine silver to commodities at large, which has been 

* The measure of weight called a livre contained 12 oz. in the time of Char- 
lemagne. 

I According to the principles established supra, sect. 3 of this chapter, there 
is reason to believe, that the value of the adulterated livre of 8 oz. of fine silver 
might have been kept up to that of the old livre of 12 oz., if the volume of the 
coin had not been augmented. But the rise of money prices, consequent upon 
the adulteration of the coin, is a ground of presumption, that the government, 
vpith a view to profit by this momentary operation, ordered a recoinage, and 
made 12 pieces out of 8, by the addition of alloy, so as to increase the total 
quantity proportionately to the reduction of the standard of quality. 

% We find in the Prolegomenes of Lc Blanc, 25, that the silver sol of St. Louis 
weighed 1 gros. 7 1-2 graiTis which, multiplied by 20, makes 2 oz. 6 gros. 6 grains, 
the livre. 



240 ON PRODUCTION. book i. 

reduced so low as 1-4 of its former amount; but this is foreign to the 
subject of the present section, and I shall take occasion to speak of it 
hereafter. 

Thus the term, livre tournois, has at different times been applied 
to very different quantities of fine silver. The alteration has been 
effected, sometimes by reducing the size and weight of the coin 
bearing that denomination, sometimes by deteriorating the standard 
of quality, that is to say, mixing up a larger portion of alloy, and a 
smaller one of pure metal; and, sometimes, by raising the denomina- 
tion of a specific coin; making, for instance, what was before a 2 fr. 
piece pass under the name of one of 3fr. As no account is ever 
taken of any thing but the pure silver, which is the only valuable 
substance in silver coin, all these expedients have had a similar effect; 
for this reason: that they all, in fact, reduced the quantity of silver 
contained in what was called a livre tournois. And this is what all 
French writers, in compliment to the royal ordinances, have digni- 
fied by the term, raising the standard; on the ground, that the nomi- 
nal value of the coin is raised by these operations; which might, with 
much more propriety, be said to lower the standard, since the metal, 
which alone constitutes the money, is thereby reduced in quantity. 

Though the quantity of metal in the livre has been continually 
decreasing from the days of Charlemagne till the present period, 
many of our monarchs have, at different times, adopted a contrary 
course, and advanced the weight and standard of quality, particu- 
larly since the reign of St. Louis. The motives for deterioration 
are evident enough: it is extremely convenient to pay one's debts 
with less money than one borrowed. But kings are not only 
debtors; they are frequently creditors too. In the matter of taxa- 
tion, they stand precisely in the same relative position to the subject, 
as landlords to their tenants. Now, if every body be enabled by 
law to pay their debts and discharge their contracts with a less 
amount of silver than bargained for, the subject, of course, can pay 
his taxes, and the tenant his rent, with a smaller quantity of that 
metal. And, although the king received less silver, yet he contin- 
ued to spend as much as before; for the nominal price of commodi- 
ties rose, in proportion to the diminution of metal in the coin. 
When -What was before 3 fr. was declared by law to be 4 fr. the 
government was obliged to pay ^fr. where it before paid but ^fr.', 
so that it was necessary, either to increase the old, or to impose new 
taxes; in other words, the government, to obtain the same quantity 
of fine silver, was obliged to demand a greater number of livres 
from the subject. This course, however, was always odious, even 
when it really made no difference in the real pressure of taxation, 
and was often quite impracticable. Recourse was, therefore, had to 
the restoration of the coin to the higher standard. The livre being 
made to contain a greater weight of silver, the nation really paid 
more silver in paying the same number of livres.* Thus we find 

* The same expedient was resorted to by that monster of prodigality, the Ro- 
man emperor Heliogabalus. The taxes of the empire were payable in specific 



CHAP. XXI. ON PRODUCTION. 241 

that the ameliorations of the coin commence nearly about the same 
period as the establishment of permanent taxation. Before that 
innovation, the monarch had no personal motive for increasing the 
intrinsic value of the coin he issued. 

It vi^ould be a great mistake to suppose that the frequent varia- 
tions of standard alluded to, were effected in the same clear and 
intelligible manner which I have adopted to explain them. Some- 
times the alteration, instead of being openly avowed, was kept secret 
as long as possible;* and this attempt at concealment gave occasion 
to the barbarous technical jargon used in this branch of manufacture. 
At other times, one denomination of coin was altered, while the rest 
were left untouched; so that, at a given period, a livre, paid in one de- 
nomination, contained more silver than if it paid in another. Finally, 
to throw the matter in still greater obscurity, the subject was com- 
monly forced to reckon up his accounts, sometimes in livres and 
sous, sometimes in crowns, and to pay in coin representing neither 
livre, sol, nor crown, but either fractions or multiples of these seve- 
ral denominations. Princes, that resort to such pettifogging ex- 
pedients, can be viewed in no other light, than as counterfeiters 
armed with public authority. 

The injurious effect of such measures upon credit, commercial in- 
tegrity, industry, and all the sources of prosperity, may be easily 
conceived; indeed, it was so serious, that, at several periods of our 
history, the monetary operations of the state suspended all com- 
merce whatever. Philip le Bel drove all foreigners out of the fairs 
of France, by compelling them to receive his discredited coin in 
payment, and prohibiting the making of bargains in a coin of better 
credit.t Philip de Valois did the same thing with respect to the 
gold coin, and with precisely the same result. A cotemporary 
chroniclerf informs us, that almost all foreign merchants discon- 
tinued their dealings with France; that the French traders them- 
selves, ruined by the frequent alterations of the coin, and the con- 
sequent uncertainty of values, withdrew to other countries; and that 
the rest of the king's subjects, both noble and bourgeois, were 
equally impoverished with the merchants; for which reason, the 
annalist adds simply enough, the king was not at all beloved. 

The examples I have cited are taken from the monetary systenj 

gold coin, called aurei, and not in gold by the tale : and the emperor, to enlarge 
his receipts, made a new issue of aurei, weighing as much as 24 oz. each. The 
virtuous Alexander Severus, actuated by an opposite motive, made a considerable 
reduction of the weight. 

* Philip de Valois, in his official instructions to the officers of the mint, 
A. D. 1350, enjoins the utmost secrecy on the subject of the purposed adultera- 
tion, even with the sanction of an oath, for the express purpose of taking in the 
commercial classes ; directing them " to put a good face upon the matter of the 
course of exchange of the mark of gold, so that the intended adulteration might 
not be discovered." Many similar instances are to be met with in the reign of 
King John. Le Blanc, Traite Hist, des Monnaies, p. 251. 

f Le Blanc, TVaite Hist, des Monnaies, p. 27. 

X Maithieu Villani. 
31 



242 ON PRODUCTION. book i. 

of France; but similar expedients have been practised in almost 
every nation, ancient or modern. Popular forms of government 
have been equally culpable with those of a despotic character. The 
Romans, during the most glorious periods of the republic, effected a 
national bankruptcy more than once, by deteriorating the intrinsic 
value of their coin. In the course of the first Punic war, the as, 
which was originally 12 oz. of copper, was reduced to 2 oz.; and, in 
the second Punic, was again lowered to 1 oz.* 

In the year 1722, the State of Pennsylvania, which acted, in this 
particular, as an independent government, even before the American 
war, passed a law, enacting, that 1/. sterling should pass for 1/. 55.;t 
and the United States, and France also, after declaring themselves 
republics, have both gone still further. 

"It would require a separate treatise," says Steuart, "to investi- 
gate all the artifices which have been contrived to make mankind 
lose sight of the principles of money, in order to palliate and make 
this power in the sovereign to change the value of the coin appear 
reasonable.''^ He might have added, that such a volume would be 
of little practical service, and by no means prevent the speedy adop- 
tion of some new device of the same kind. The only effectual pre- 
ventive would be, the exposure of the corrupt system, that engen- 
ders such abuses; were that system rendered simple and intelligible, 
every abuse would be detected and extinguished in the outset. 

And let no government imagine, that, to strip them of the power 
of defrauding their subjects, is to deprive them of a valuable privi- 
lege. A system of swindling can never be long-lived, and must 
infallibly in the end produce much more loss than profit. The feel- 
ing of personal interest is that which soonest awakens the intel- 
lectual faculties of mankind, and sharpens the dullest apprehensions. 
Wherefore, in matters affecting personal interest, a government has 
the least chance of outwitting its subjects. Individuals are not 
easily duped by measures tending to procure supplies to the state in 
an under-hand manner: and although they cannot guard against 
direct outrage, or breach of public faith, yet it can never long escape 
their penetration, however artfully disguised and concealed. The 
government will acquire a character for cunning as well as faithless- 
ness, and will lose entirely the powerful engine of credit, which will 
operate with infinitely more efficacy, than the mere trifle that fraud 
can procure. Yet, even that trifle will often be wholly engrossed 
by the agents of government, who are sure to turn every act of in- 
justice towards the subject, to their own private advantage. Thus, 
while the government loses its credit, its agents get all the profit; 
and the public authority is disgraced, for no other purpose, than to 
enrich its menials. 

The real interest of a government is, to look not to fictitious, dis- 
graceful, and destructive resources, but to such as are really prolific 

* Montesquieu, Esprit des Lois, liv. xxii. c. 11. 

t Smith's Wealth of Nations, book ii. c. 2. 

^ Stewart's Inquiry into the Princ. Pol. Econ. 8vo. 1805, vol. ii. p. 306. 



CHAP. XXI. ON PRODUCTION. 243 

and inexhaustible; and one can render it no better service, than to 
expose and render abortive those of the former kind, and point out 
to it those of the latter. 

The immediate consequence of a deterioration of the coin is, a 
proportionate reduction of all debts and obligations payable in 
money; of all perpetual or redeemable rent-charges, whether upon 
the state or upon individuals; of all salaries, pensions, and rack- 
rents; in short, of all values previously expressed in money; by 
which reduction, the debtor gains what the creditor loses. It is a 
legal authorization of a partial bankruptcy, or compromise, by every 
money-debtor with his creditor, for a sum less than his fair claim, in 
the ratio of the diminution of precious metal in the same denomina- 
tion of coin. 

Thus, whatever government has recourse to this expedient, is not 
content with giving itself an illegitimate advantage, but urges all 
other debtors to do so likewise. 

The kings of France, however, have not always allowed their sub- 
jects to reap the same advantage in their private concerns, which the 
monarch proposed to himself by the operation of increasing or dimin- 
ishing the quantity of metal contained in a particular denomination 
of coin. Their personal motive was, on all such occasions, to pay 
less, or receive more silver or gold themselves, than in honesty they 
ought; but they sometimes compelled individuals, notwithstanding 
the alteration, to pay and receive in the old coin, or, if in the new, at 
the current rate of exchange between the two.* This was a close 
copy of a Roman precedent. When that republic, in the second 
Punic war, reduced the as of copper from two oz. to one, the repub- 
lic paid its creditors 1 as instead of two, that is to say, 50 per cent 
on their claims. But private accounts were kept in denarii; and 
the denarius, which till then was worth 10 asses, was, by law, made 
to pass for 16 asses; so that individuals paid 16 asses or oz. of cop- 
per only for everv denarius, instead of paying 20 as they should 
have done to fulfil their engagements: that is to say, 10 asses of 2 
oz. or 20 of 1 oz. each, for every denarius. Thus, the republic paid 
a dividend of 50 per cent only, but compelled private persons to pay 
one of 80 per cent. 

A bankruptcy, effected by deterioration of the coin, has been 
sometimes considered in the light of a plain and simple bankruptcy, 
or mere reduction of the public debt. It has been thought less inju- 
rious to the public creditor to pay him in adulterated coin, that he 
again may pay over at the same rate, as he receives it, than to cur- 
tail his claim by \, 5, or in any other proportion. Let us see how 
the two methods differ. 

In either case, the creditor is equally a loser in all his purchases 
posterior to the bankruptcy. Whether his income be abridged by 
one-half, or whether he find himself obliged to pay for every thing 
twice as dear as before, is to him precisely the same thing. 

* Vide the several ordinances of Philip le Bel in 1303 ; of Philip de Valois in 
1329 and 1343; of John in 1354; and of Charles VI. 1421. 



244 ON PRODUCTION. book i. 

As to all his own existing debts, he may undoubtedly get rid of 
them on the same terms as the public has discharged his own claim; 
but what ground is there for supposing, that the public creditors are 
always in arrear in their private accounts with tlie rest of the com- 
munity? They stand in the same relation to society as all other 
classes; and there is every reason to believe that the public creditors 
have as much owing to them by one set of individuals as they owe 
themselves to another; in short, that the accounts will square. 
Thus, the injustice they do to their private claimants is balanced by 
the injury they receive; and a bankruptcy, in the shape of a dete- 
rioration of the coin, is to them full as bad, as in any other shape. 

But it is attended with other serious evils, destructive of national 
welfare and prosperity. 

It occasions a violent dislocation of the money -prices of commo- 
dities, operating in a thousand different ways, according to the parti- 
cular circumstances of each respectively, and thereby disconcerting 
the best planned and most useful speculations, and destroying all 
confidence between lender and borrower. Nobody will willingly 
lend when he runs the risk of receiving a less sum than he has 
advanced; nor will any one be in a hurry to borrow, if he is in dan- 
ger of paying more than he gets. Capital is, consequently, diverted 
from productive investment, and the blow given to production by 
deterioration of the coin, is commonly followed up by the still more 
fatal ones of taxation upon commodities, and the establishment of a 
maximum of price. 

Nor is the effect less serious in respect to national morality. Peo- 
ple's ideas of value are kept in a state of confusion for a length of 
time, during which knavery has an advantage over honest simplicity, 
in the conduct of pecuniary matters. Moreover, robbery and spo- 
liation are sanctioned by public practice and example; personal inter- 
est is set in opposition to integrity; and the voice of the law to the 
impulse of conscience. 



Section VI. 

Of the reason why Money is neither a Sign nor a Measure. 

Money would be a mere sign or representative, had it no intrin- 
sic value of its own; but, on the contrary, whenever it is employed 
in sale or purchase, its intrinsic value alone is considered. When 
an article is sold for a dollar piece, it is not the impression or the 
name that is given or taken in exchange, but the quantity of silver 
that is known to be contained in it. As a proof of the truth of this 
position, if the government were to issue crown pieces made of tin 
or pewter, they would not be worth so much as those of silver. 
Though declared by law to be of equal value, a great many more of 
them would be required in purchase of the same commodities; 
which would not happen if they were nothing but a mere sign. 



CHAP. XXI. ON PRODUCTION. 245 

Violence, ingenuity, or extraordinary political circumstances have 
sometimes kept up the current value of a money, after a reduction 
of its intrinsic value; but not for any length of time. Personal inter- 
est very soon finds out whether more value is paid than is received, 
and contrives some expedient to avoid the loss of an unequal and 
unfair exchange. Even when the absolute necessity of finding some 
medium of circulation of value obliges a government to invest with 
value an agent, destitute either of intrinsic value or substantial guar- 
antee, the value attached to the sign by this demand for a medium, 
is actual value, originating in utility, and makes it a substantive 
object of traffic. A Bank of England note, during the suspension of 
cash payments, was of no value whatever as a representative; for it 
then really represented nothing, and was a mere promise without 
security, given by the bank, which had advanced it to the govern- 
ment without any security; yet this note, by its mere utility, was 
possessed of positive value in England, as a piece of gold or silver. 

But a bank-note, payable on demand, is the representative, the 
sign,(l) of the silver or specie, which may be had whenever it is 
wanted, on presenting the note. The money or specie, which the 
bank gives for it is not the representative, but the thing represented. 

When a man sells any commodity, he exchanges it, not for a sign 
or representative, but for another commodity called money, which 
he supposes to possess a value equal to the value sold. When he 
buys, he does so, not with a sign or representative, but with a com- 
modity of real, substanstial value, equivalent to the value received. 

A radical error, in this particular, has given rise to another of very 
general prevalence. Money having been pronounced to be the sign 
of all values whatever, it was boldly inferred, that, in every country, 
the total value of the money, bank and other notes, and credit paper, 
is equal to the total value of all other commodities. A position that 
derives some show of plausibility, from the circumstance, that the 
relative value of money declines when its quantity is increased, and 
advances when that quantity is diminished. 

(1) The term, " representative," or " sign," of silver or specie, as applied to 
bank-notes, has no precise or definite meaning. A bank-note, with no sort of 
accuracy can be said to be "the representative of money;" and as such loose 
metaphorical expressions have given occasion to most of the vague and mystical 
notions respecting paper-money which have been too long current, and only 
serve to involve the subject in obscurity and confusion, they cannot too soon be 
discarded. 

We have already seen, that coins are neither more nor less than commodities, 
which are bought and sold for their value, like other commodities. Bank-notes 
are not, any more than bills of exchange, or other transferable engagements for 
the payment of money, the representatives or symbols of these commodities ; 
but are actual obligations for the payment, on demand, or at a stated time, of the 
quantity of the coins expressed on the face of them, and are themselves received 
in payment as readily as specie itself, only when it is perfectly understood, 
that the specie can be obtained for them, or when it is generally known, that 
they will be as readily received in the market as the coins which they specify. 

American Editor. 



246 ON PRODUCTION. book i. 

It is obvious, however, that the same fluctuation affects all other 
commodities whatever. If the vintage be twice as productive one 
year as it is another year, the price of wine falls to half what it was 
the year preceding. In like manner, one may readily concede, that, 
should the aggregate of circulating specie be doubled, the prices of 
all goods would be doubled also; in other words, twice the quantity 
of specie would go to the purchase of the same articles. But this 
consequence by no means proves, that the total value of the circu- 
lating medium is always equal to the sum total of all the other items 
of wealth, any more, than that the sum total of the produce of the 
vintage is equal to the totality of other values. The casual fluctua- 
tion in the value of silver and of wine, in the cases supposed, is the 
effect of a difference in quantity of these respective commodities at 
two different times, aad has nothing to do with the quantity of other 
commodities. 

It has been already remarked, that the total value of the money of 
any country, even with the addition to the value of all the precious 
metals contained in the nation under any other shape, is but an 
atom, compared with the gross amount of other values. Wherefore, 
the thing represented would exceed in value the representative; and 
the latter could not command the presence or possession of the 
former.* 

Nor is the position of Montesqieu, that money-price depends upon 
the relative quantity of the total commodities to that of the total 
money of the nationt at all better founded. What do sellers and 
buyers know of the existence'^of any other commodities, but those 
that are the objects of their dealing? And what difference could 
such knowledge make in the demand and supply in respect to those 
particular commodities? These opinions have originated in the 
ignorance at once of fact and of principle. 

Money or specie has with more plausibility, but in reality with 
no better ground of truth, been pronounced to be a measure of 
value. Value may be estimated in the way of price; but it can not 
be measured, that is to say, compared with a known and invariable 
measure of intensity, for no such measure has yet been discovered. 
• Authority, however absolute, can never succeed in fixing the 
general ratio of value. It may enact, that John, the owner of a sack 
of wheat, shall give it to fiichard for 4 dollars; and so it may that 
John shall give his sack of wheat for nothing. This enactment will 
probably rob John to benefit Richard; but it can no more make 4 

* If credit-paper be thrown into the scale, it will not help us over this diffi- 
culty. The agent of circulation, whether in form of specie or of paper, can 
never exceed in amount the total utility vested in it. The expansion of the vo- 
lume of a national mc-ney, whether of metal or of paper, is sure to be followed 
by a proportionate dilution of its value, which disables the whole from being 
equal to the purchase of a greater portion of commodities at large: and the 
value, devoted to the business of circulation, is always a trifle, compared with 
the value it is employed to circulate. Vide infra, under the head of Bank-notes. 

f Esprit des Lois, liv. xxii. c. 7. 



CHAP. XXI. ON PRODUCTION. 247 

dollars the exact measure of the value of a sack of wheat, than it can 
make a sack of wheat worth nothing, by ordering it to be given for 
nothing. 

A yard or a foot is a real measure of length; it always presents 
to the mind the idea of the self-same degree of length. No matter 
in what part of the world a man may be, he is quite sure, that a 
man of b feet high in one place is as tall as a man 6 feet high in 
another. When I am told that the great pyramid of Ghaize is 656 
feet square at the base, I can measure a space of 656 feet square at 
Paris, or elsewhere, and form an exact notion of the space the pyra- 
mid will cover; but when I am told that a camel is at Cairo worth 
50 sequms, that is to say, about 90 ounces of silver, or 100 dollars 
in coin, I can form no precise notion of the value of the camel; 
because, although I may have every reason to believe that 100 dol- 
lars are worth less at Paris than at Cairo, I can not tell what may be 
the difi'erence of value. 

The utmost, therefore, that can be done is, merely to estimate or 
reckon the relative value of commodities; in other words, to declare 
that at a given time and place, one commodity is worth more or less 
than another; Wigiy positive value it is impossible to determine. A 
house may be said to be worth 4000 dollars; but what idea does that 
sum present to the mind? The idea of whatever I can purchase 
with it; which is, in fact, as much as to say, the idea of value equi- 
valent to the house, and not of value of any fixed degree of inten- 
sity, or independent of comparison between one commodity and 
another. 

When two objects of unequal value are both compared to differ- 
ent portions of oiie specific product, still it is a mere estimate of 
relative value. One house is said to be worth 4000 dollars, another 
2000 dollars; which is simply saying, the former is worth two of 
the latter. It is true, that, when both are compared to a product 
capable of separation into equal portions, as money is, a more accu- 
rate idea can be formed of the relative value of one to the other; for 
the mind has no difficulty in conceiving the relation of 2 inteo-ers to 
1, or 4000 to 2000. But any attempt "to form an abstract noSon of 
the value of one of these integers must be abortive. | 

If this be all that is meant by the term, measure of value, I \ i 
admit that money is such a measure; but so, it should be observed, ' ^ 
IS every other divisible commodity, though not employed in the 
character of money. The ratio of the one house to the other will 
be equally intelligible, if one be said to be worth 1000, and the other 
only 500, quarters of wheat. 

Nor will this measure of relative value, if we may so call it, 
convey an accurate idea of the ratio of two commodities one to the 
other, at any considerable distance of time or place. The 1000 
quarters of wheat, or 4000 dollars, will not be of any use in the 
comparison of a house in former, with a house in the present times; 
for the value of silver coin and of wheat have both varied in the 
interim. A house at Paris, worth 10,000 crowns in the days of 



248 ON PRODUCTION. book i. 

Henry IV., would now be worth a great deal more, than another of 
that value now-a-days. So, likewise, one in Lower Britany, worth 
4000 dollars, is of much more value than one of that price at Paris; 
for the same reason that an income of 2000 dollars is a much larger 
one in Britany than at Paris. 

Wherefore it is impossible to succeed in comparing the wealth of 
different eras or different nations. This, in political economy, like 
squaring the circle in mathematics, is impracticable, for want of a 
common mean or measure to go by. 

Silver, and coin too, whatever be its material, is a commodity, 
whose value is arbitrary and variable, like that of commodities in 
general, and is regulated on every bargain by the mutual accord of 
the buyer and seller. Silver is more valuable when it will purchase 
a large quantity of commodities, than when it will purchase a smaller 
quantity. It can not, therefore, serve as a measure, the first requi- 
site of which is invariability. Thus, in the assertion of Montes- 
quieu, when speaking of money, that " what is the common mea- 
sure of all things, should of all things be the least subject to change,"* 
there are no less than three errors in two lines. For, in the first 
place, it has never been pretended, that money is the measure of all 
things, but merely that it is the measure of values; secondly, it is not 
even the measure of values; and lastly, its value can not be made 
invariable. If it was the object of Montesquieu to deter governments 
from altering the standard of their coin, he should have laboured 
to enforce those sound arguments, which the question would fairly 
have supplied him with, instead of dealing in brilliant expressions, 
which serve to mislead and give currency to error. 

It would, however, often be a matter of curiosity, and sometimes 
even of utility, to be able to compare two values at an interval of 
time or place; as, for instance, when there is occasion to stipulate 
for a payment at a distant place, or a rent for a long prospective 
term. 

Smith recommends the value of labour as a less variable, and, 
consequently, more appropriate, measure of absent or distant value; 
he reasons thus upon the matter: " Equal quantities of labour, at all 
times and places, may be said to be of equal value to the labourer. 
In his ordinary state of health, strength, and spirits, in the ordinary 
degree of his skill and dexterity, he must always lay down the same 
portion of his ease, his liberty, and his happiness. The price, which 
he pays, must always be the same, whatever may be the quantity of 
goods which he receives in return for it. Of them, indeed, it may 
sometimes purchase a greater and sometimes a smaller quantity; but 
it is their value which varies, not that of the labour which purchases 
them. At all times and places, that is dear, which it is difficult to 
come at, or which it costs much labour to acquire; and that cheap, 
which is to be had easily, or with very little labour. Labour alone, 
therefore, never varying in its own value, is alone the ultimate and 

* Esprit des Lois, liv. xxii. c. 3. 



CHAP. XXI. ON PRODUCTION. 249 

real standard, by which the value of all commodities can at all times 
and places be estimated and compared."* 

With great deference to so able a writer, it by no means follows, 
that, because labour in the . same degree is always to the labourer 
himself of the same value, therefore it must always bear the same 
value as an object of exchange. Labour, like commodities, may 
vary in the supply and demand ; and its value, like value in general, 
is determined by the mutual accord of the adverse interests of buyer 
and seller, and fluctuates accordingly. 

The value of labour is affected materially by its quality. The 
labour of a strong and intelligent person is worth much more than 
that of a weak and ignorant one. Again, labour is more valuable 
in a thriving community, where there is a lively demand for it, than 
in a country overloaded with population. In the United States, the 
daily wages of an artificer amount in silver to three times as much 
as in France.! Are we to infer, that silver has then but J of its 
value in France? The artificer is there better fed, better clothed, 
and better lodged; which is a convincing proof, that he is really 
better paid. Labour is probably one of the most fluctuating of 
values, because at times it is in great request, and at others is ofiered 
with that distressing importunity occasionally witnessed in cities 
where industry is on the decline. 

Its value has, therefore, no better title to act as a measure of two 
values at great distances of time or place, than that of any other 
commodity. There is, in fact, no such thing as a measure of value, 
because there is nothing possessed of the indispensable requisite, 
invariability of value. 

In the absence of an exact measure, we must be content to ap- 
proximate to accuracy; and, to this end, many commodities of well 
known value will serve to give a notion, more or less correct, of the 
value of any specific product. At the same point of time and place, 
there is little difficulty in the approximation: the value of any given 
article may be readily measured by almost all others. To ascertain 

* Wealth of Nations i book i. c. 5. On this point, Smith observes, that " labour 
was the first price, the original purchase-money, that was paid for all things. It 
was not by gold or silver, but by labour, that all the wealth of the world was 
originally purchased." I think I have succeeded in proving that he is mistaken. 
Nature executes an essential part of the production of values; and her agency is 
in most cases paid for, and forms a portion of the value of the product. The 
profit of land, which is called rent, is paid to the proprietor, who does nothing 
himself, and stands in place of the original occupant; and it affects the value of 
the product, raised by the joint agency of nature and industry; the portion of 
value contributed by nature is not the product of human labour. Capital also, 
which is, for the most part, the accumulated product of labour, concurs, like 
nature, in the business of production, and receives in recompense a portion of 
the product; but the gains, accruing to the capitalist, are quite distinct from the 
accumulated labour vested in the capital itself, which can be expended or con- 
sumed in toto, by one set of persons; while its share in the product, in other 
words, the interest paid for its use, may be consumed by another. 

f Humboldt reckons it at from 3 fr. 50 cents to 4 fr. of our money. Essai 
Pol. sur la Nouvellc Espagne, torn. iii. p. 105. oct. ed. 
32 



250 ON PRODUCTION. book i. 

pretty nearly the value of an article amongst the ancients, we must 
find out some article which there is reason to think has suhsequently 
undergone little change of value, and then compare the quantity of 
that article given by the ancients and moderns respectively, in ex- 
change for the article in question. Wherefore, silk would be a bad 
object of comparison; because it was, in the time of Caesar, procura- 
ble from China only, at a most extravagant expense, and, being then 
nowhere produced in Europe, must of course have been much dearer 
than at present. Is there any commodity that has varied less in the 
intervening period? and, if there be any such, how much of it was 
then given for an ounce of silk? These are the two points we must 
inquire into. If any one article can be discovered, that was pro- 
duced with equal ease and perfection at the two periods, and the 
consumption of which had a natural tendency to keep pace with its 
abundance, this article would probably have varied little in value, 
and may be taken as a tolerable measure of other values. 

Ever since the earliest times recorded in history, wheat has been 
the staple food of the great mass of the population, in all the princi- 
pal nations of Europe; consequently, their relative population must 
have been influenced by the abundance or scarcity of this article of 
food, more than of any other: the ratio of the demand to the supply 
must have been, therefore, at all times nearly the same. There is, 
besides, no product which 1 know of, that has undergone less altera- 
tion in the course of production. The agricultural skill of the an- 
cients was in most respects equal, and in some, perhaps, superior to 
our own. Capital, indeed, was dearer amongst them; but that dif- 
ference was little felt; for, in ancient times, the proprietor was com- 
monly both farmer and capitalist; and the capital embarked in agri- 
culture yielded less return than other investments; because, as more 
honour was attached to this, than to the other branches of industry, 
commerce and manufacture, the influx of capital, as well as of labour, 
into that channel, was greater than into the other two. And, during 
the middle ages, in spite of the general declension of all the arts, the 
tillage of arable land was prosecuted with a skill little inferior to that 
of the present day. 

Whence I infer, that the same quantity of wheat must have borne 
nearly the same value among the ancients, during the middle ages 
and at the present time. But, as there has all along been a vast dif- 
ference in the produce of the harvest in one year and another, grain 
being sometimes so abundant, as to sell extremely low, and at other 
times so scarce, as to occasion famine, the value of grain must be 
taken on an average of years, whenever it is made the basis of any 
calculation. 

So much for the estimation of values at distant periods of time. 

There is equal diificulty in the estimation at great distances of 
place. The staple articles of national food, whicli, as such, maintain 
the greatest uniformity in the ratio of the demand and supply, are 
very different in different climates. In Europe, wheat is the staple; 
m Asia it is rice: the relative value of neither the one nor the other 



CHAP. XXI. ON PRODUCTION. 251 

in Asia and Europe is tolerably steady; nor has the value of rice in 
Asia any relation to the value of wheat in Europe. Rice is beyond 
question less valuable in India, than wheat is in this part of the 
world; for, besides that the cultivation is less expensive, it yields 
two crops in the year. This is one reason, why labour is so cheap 
in India and China. 

The article of food in most general use is, therefore, but a bad 
measure of value at great distances of place. Nor are the precious 
metals by any means a correct one: their value is indubitably not so 
great in North America and the West Indies, as in Europe, and 
much greater in every part of Asia, as the constant efflux of specie 
thither sufficiently proves. Yet the frequency of communication 
between these different parts of the world, and the facility of trans- 
port, give us reason to suppose them the least liable to fluctuation of 
value on their passage from one climate to another. 

There is happily no necessity, for the purposes of commerce, to 
compare the relative value of goods and of metals in two distant 
parts of the world; it is quite enough to know their relation to 
other commodities in each country. When a merchant remits to 
China half an ounce of silver, it is of little importance to him, whe- 
ther it has more relative value in China than in Europe. All he 
wants to know is, whether he can buy with it at Canton a pound of 
tea of a certain quality, which he can re-sell in Europe, say for two 
ounces of silver. With these data, and in expectation of receiving, 
at the close of the speculation, a gross profit of an ounce and a half 
of silver, he calculates whether that profit will leave him a sufficient 
nett profit, after covering the charges and risk out and home; and 
this is all he cares about. If, instead of bullion, he remit goods, it 
is enough for him to know; 1. The relation between the value of 
these goods and silver in Europe; that is to say, how much they 
will cost; 2. The relation between their value and that of Chinese 
products at Canton; that is to say, what he can get in exchange for 
them; and, lastly, the relation between these latter and silver in 
Europe; that is to say, what they will be worth when imported. It 
is evident that every repetition of this operation brings into question 
nothing more than the relative value of two or more articles at the 
same time, and at the same place. 

For the common purposes of life, or, in other words, when no- 
thing more is requisite, than to compare the value of two objects, at 
no great distance of time or place, most commodities possessed of 
any value at all may serve as a measure; and if, in describing the 
value of an object, even where there is no question of either buying 
or selling, the estimation is more generally made in the precious 
metals, or in money, than in an}?- other commodity; it is simply, be- 
cause its value is more generally known, than that of other com- 
modities.* But, in all bargains for a long prospective period, as for 

* The difference of value in different objects has, throughout this work, been 
Qoted in money-price or what they will fetch in money ; extreme correctness not 



252 ON PRODUCTION. book i. 

the reservation of a perpetual rent, it is more advisable to reckon in 
wheat: for the discovery of a single mine might perhaps greatly re- 
duce the present value of silver; whereas the tillage of all North 
America could not sensibly alter the value of wheat in Europe: for 
the number of mouths to be fed in America, would increase almost 
in the ratio of the improved cultivation. But long prospective 
stipulations regarding value must unavoidably, under any circum- 
stances, be very precarious, and can never give any certain notion 
of the value that is likely to be received. Perhaps the most im- 
provident course of all is, to stipulate for a particular denomination 
of money; for the same denomination may be fixed to any variation 
of weight or quality whatever; and the contracting party may find 
he has bargained for a name, rather than a value, and that he runs 
the risk of paying, or being paid, in mere words. 

I have dwelt thus long upon the refutation of incorrect express- 
ions, because they appear to have acquired too general a circulation;* 
and because they often confirm people in false notions and ideas, 
which ideas sometimes serve as the basis of erroneous systems, that 
in their turn give birth to conduct equally erroneous. 



Section VII. 

Of a Peculiarity that should be attended to, in estimating the 
Sums mentioned in History, 

In reducing the money of former ages into money of the present 
day, the best informed historians have contented themselves with 
converting the actual quantity of gold and silver, designated by the 
term made use of by the authority cited, into the current money of 
their own times. But this is not enough: the actual sum, the real 
amount of the metal, can give no correct notion of its then value, 
which is the very point we want to arrive at. It is, therefore, ne- 
cessary to reckon besides the fluctuations of value that the metal 
itself has undergone. 

A few examples will best explain my meaning: 

Voltaire tells us, in his Essay on Universal History ,t that Charles 
V. enacted, that the sons of France should have an annual revenue 
settled on them of 12,000 livres: and, as he reckons this sum to be 
equal to 100,000 livres of the present day, he naturally enough 
observes, that this was no great provision for the sons of the monarch. 
But let us examine the grounds for this calculation of Voltaire. 

being necessary for illustration. Even in the exact science of geometry, the 
figures are given merely to make the demonstrations more intelligible; strict 
accuracy is necessary in the reasoning and conclusions only. 

* After the appearance of three editions of this work, Sismondi published his 
Nouveaux Principes cfEcon. Pol. ; wherein amongst many excellent chapters, 
there is one entitled, "money, the sign, token, and measure of value." Liv. v. c.l. 

f Edit, de Kehl, oct. tom. xvii. p. 394. 



CHAP. xxT. ON PRODUCTION. 



253 



First, he reckons that the mark of fine silver was, in the time of 
Charles V., worth about 6 Uvres; at this rate, 12,000 livres will 
make 2000 marks of silver, which, at their relative value at the date 
of Voltaire's writing, would in fact amount to 100,000 livres, or 
thereabouts. But 2000 marks of fine silver were worth in the reign 
of Charles V. much more than in the reign of Louis XV. Of this 
we shall be convinced, by a comparison of the relative average at the 
two difibrent periods, of pure silver to wheat, which we will take as 
one of the least variable. 

Dupre of St. Maur, whose book* is an ample repository of learned 
information upon the value of commodities, gives it as his opinion 
that, from the reign of Philip Augustus, who died A. D. 1223, until 
about the year 1520, the setier of wheat (Paris measure) was worth 
on the average, as much as 1-9 of a mark of fine silver; i. e. about 
512 grains weight. 

About the year 1536, when the mark of silver was of the value of 
13 livres tournois, or rather passed under the denomination of 13 
hvres tournois, the ordinary price oi ^ setier of wheat was about 3 
hvres tournois, i. e. 3-13 of a mark of fine silver, amounting to 1063 
grains weight of that metal. 

In 1602, under the reign of Henry IV., the mark of fine silver 
being at that time equal to 22 livres, the average price of the setier 
of wheat was 9 liv. \6s. del.; i. e. 2060 grains of fine silver.t 

Since that period, the setier of wheat has, one year with another 
been constantly worth about the same weight of silver. In 1789,' 
when the mark was equivalent to 54 liv. Ids. the average price of 
wheat was, according to Lavoisier, 24 liv. the setier, i. e. 2012 grains 
of fine silver. I have not reckoned the fractions of grains, for in 
these matters it is enough to approximate to accuracy; indeed the 
price of the setier, taken at the average of Paris and the environs, is 
itself but loosely calculated. 

The result of this comparative statement is, that the setier of 
wheat, whose relative value to other commodities has varied little 
from 1520 down to the present time, has undergone great fluctua- 
tions, being worth, 

A. D. 1520 - - 512 gr. of pure silver. 
1536 - - 1063 do. do. 
1602 - - 2060 do. do. 
1789 - - 2012 do. do. 
which shows that the value of pure silver must have varied consi- 
derably since the first of these dates; inasmuch as on every act of 
exchange, four times as much of it must now be given for the same 
quantity of commodities, as was given three centuries ao-o We 
shall see by-and-by,t why the discovery of the American mines, and 

* Rapport entre V Argent et les Dcnrks, p. 35. 

t For these calculations I am indebted to the Essai sur les Monnaies, and the 
yanations dans les Prix, both by Dupre de Saint Maur. 
t Book II. Chap. 4., 



254 ON PRODUCTION. book i. 

the influx into the market of about ten times as much silver as 
before, has operated to reduce its value only in the ratio of 4 to 1. 

Now to the application of this information to the royal stipend in 
question: if pure silver was worth in the time of Charles V. four 
times as much as in the age of Voltaire, the settlement of 2000 marks 
upon the sons of France was equivalent to 8000 marks at the pre- 
sent, that is to say, more than 400,000 fr. of our present currency, 
or about 75,000 dollars; which makes the observation of Voltaire 
upon the inadequacy of the provision much less applicable. 

Raynal, though he wrote avowedly upon commercial matters, has 
committed a similar error, in estimating the public revenue in the 
reign of Louis XII. at 36 millions of our present money [francs) on 
the ground, that it amounted to 7,650,000 liv. of 11 liv. to the mark 
of silver.. This sum, indeed, was equal to 695,454 marks of silver: 
but it would not be enough merely to reduce the mark into livres of 
the present day; for the same quantity of silver was then worth four 
times as much as it is now; so that, before reducing them into 
modern money, they should be multiplied by four, which will swell 
the public revenue under Louis XII. to a sum of 144 millions of 
francs of present currency, or nearly 27 millions of dollars. 

Again, we read in Suetonius, that Csesar made Servilius a present 
of a pearl worth 6 millions of sestertii, which his translators. La 
Harpe and Levesque, estiniate to be equal to 1,200,000 fr. present 
money. But a little lower down, we find, that Csesar, on his return 
to Italy, disposed of the gold bullion, accruing from the plunder of 
Gaul, for coin, at the rate of 3000 sestertii to the pound of gold; 
which shows the pearl of Servilius to have been much under-rated. 
The Roman pound, according to Le Blanc, weighed 10 2-3 of our 
ounces; and 10 2-3 oz. of gold in Caesar's time, were worth as much 
as 32 ounces of that metal at the present day, for it may reasonably 
be reckoned, that the value of gold has fallen in the ratio of 3 to 1.* 
Now 32 oz. of gold are worth nearly 3036 /r., which may therefore 
be looked upon as about the real value of 3000 sestertii; at which 
rate the pearl in question must have been worth 6,072,000 fr. 
(1,129,392 dollars,) and the Roman sestertius, somewhat more than 
9. franc of our money; which is greatly beyond the ordinary esti- 
mate.t 

* 12 oz. of silver were given for 1 oz. of gold, in Caesar's time. Where- 
fore, silver having fallen in the ratio of 4 to 1, 1 oz. of gold vs^as worth as much 
in his days, as 48 oz. of pare silver at the present period. But 48 oz. of silver 
are now worth 3 oz. of gold or thereabouts : so that gold must have fallen in the 
ratio of about 3 to 1. 

f The same error of calculation has led these translators involuntarily to 
underrate the prodigality of the worst of the emperors. Thus we are told, that 
Caligula, in less than a year, squandered the whole of the treasure accumulated 
by Tiberius, amounting to 2700 millions of sestertii, which La Harpe translates 
into no more than 540 millions of Uvres .• whereas, supposing the value of gold 
to have varied little between the days of Caesar and of Caligula, which is pro- 
bable enoufrh, it will be found to amount to very nearly 3000 millions of livres. 



CHAP. XXI. ON PRODUCTION. 



255 



When Caesar laid hands upon the public treasures of Rome, in 
spite of the opposition of the tribune Metellus, he is stated to have 
lound them to consist of 4130 lbs. of gold, and 80,000 lbs. of silver- 
which Vertot estimates to have amounted to 2.911,100 liv. tourn • 
but upon what grounds I am at a loss to imagine. To form a tole- 
rably correct notion of the treasure seized by Csesar upon his usur- 
pation, the 41 30 lbs. of gold should be reduced into oz. of the French 
standard, at the rate of 10 2-3 oz. to the Roman lb.- which makes 
44,052 OZ. But, as the same weight of gold was then worth three 
times as much as at present, the value will appear to have been 
132,156 oz. or 12,530,346 fr. (2,330,644 dollars,) supposing the 
Th «^ .nn T^^'^y.'^l tl^e gold to have been the same as at present. 

4n nnn .? I' T'^^'^ °^ '^^'^^'" '^'° ^^^^'^ then worth as much as 
J^o,ooo Jbs. at the present period, i. e. 20,915,735 fr., (3,890,327 
dollars,) reckoning the Roman lb. at 10 2-3 oz., and taking the 
standard of quality to have been the same. Wherefore, the sum 
appropriated by the usurper amounted to 33,446,081 /r. (6 232 971 
dollars ) of our money; which is greatly above Vertot's estimate of 
about 3 millions only. 

From this specimen we may judge, how little reliance can be 
placed on the calculations of other historians, of less information and 
accuracy than those I have been quoting. Rollin, in his Ancient, 
and i<leury, in his Ecclesiastical History, have reckoned the talen- 
tum, mma and sestertius, according to the scale made out by some 
earned persons, under the administration of Colbert. This scale is 
liable to many objections: 1. It establishes upon very questionable 
data,\he respective quantities of the precious metals contained in 
the coins of the ancients, which is a primary source of error: 2. The 
value oi the precious metals have considerably varied, between the 
period of antiquity in question and the ministry of Colbert, which 
is another source of error: 3. The scale of reduction, drawn up under 
the direction of that minister, was calculated at the rate oi 2Q liv 10 
sous,io the mark of silver, being the then mint price of silver bul- 
lon; but this rate was altered before the davs of Rollin, which is a 
third source of error. Lastly, since the date of his publication, that 
rate has been still further altered, and a livre tournois, conveys to 
us the idea of a smaller quantity of silver, than it did in his time; 

Indeed, it seems hardly possible, that a less sura would have sufficed for the 
monstrous extravagancies recorded of him. ''umcea lor me 

K.ST''^' ^P''^'. .^- ^}\- "• speaks of an estate, that, from the context, must 
tirHin f •^^"^•'^.^'^^•^l^ «»«' ^\ l^eing of the value of 300,000 stsMii, ^hich 
^^Z^^l ™^ II'"^' '""""'''^^ to 303,600 fr. (about 56,470 dollars) of ou^ 
hv ptL^tT'^'tK f ^°">'"e"tator,i)««.r, perverts the meaning of the passage, 
by estimating the estate in question, at 22,500 /r. only, or 4185 dollars. ^ 
* Le Blanc. Traite Monnaies, p. 3. estimates the Roman lb. of 12 oz. at the 

oJt'i'^T..' °^ °"^^ l"^?-^ °"' °^ '" ''""^■^^^' t^l^'^g a« a g"ide, the weight 
Th.^? "^.^'^^^^'^s f the emperors which are in a hijh stati of preservation! 
The valuation I have here given of the oz. of gold, takes it at the m nt standard 

Lfa Zlti P'^P^r^ o "^ '-'^ '^'^y ' ^'' ^ ^^^« '' ^'' g^^"*«d' th^t the gold, thus' 
laid hands upon by Caesar, was not pure gold, but coin with a mixturl of alloy 



256 ON PRODUCTION. book i. 

and this is a fourth source of error. Thus, whoever now takes up 
that work, relying on the calculations therein contained, will enter- 
tain a most erroneous idea of the income and expenditure of the 
states of antiquity, as well as of their commerce, their resources, and 
every part of their system and organization. 

Not that I would be understood to say, that a writer of history 
can ever have sufficient data, to give his readers, in all cases, a cor- 
rect notion of values in general; but, for the sake of a closer ap- 
proximation to accuracy, than has hitherto been effected,, in reducing 
the sums of ancient times, and even of the middle ages, into modern 
money, I would recommend, what indeed is generally done, first, to 
inquire from those learned in antiquity, the actual weight of precious 
metal contained in the coin in question: secondly, as far back as the 
Emperor Charles V., that is to say, about the year 1520, that 
quantity, if gold, must be multiplied by 3 only, and if silver, by 4:* 
because the discovery of the American mines has occasioned a fall 
in nearly that proportion: and lastly,- to reduce that quantity of gold 
or silver into the current money of the period, at which he may 
happen to be vmting. 

From the year 1520 downwards, the value of silver progressively 
declined until the latter end of the reign of Henry IV., that is to 
say, towards the beginning of the seventeenth century. We may 
judge of the depression of its value by the increasing price of any 
given commodity, in the manner explained in the preceding section. 
To acquire a correct notion of the value of the mark of silver during 
this period, it will be necessary to allow for a diminution in the ratio 
of the increased real, that is, metal, and not nominal or coin, price 
of commodities in general, or of any one, as wheat, for instance, in 
particular. 

From the beginning of the seventeenth century, there will be no 
occasion for any further allowance, after having reduced the money 
of the time being into marks of silver; for there does not appear to 
have been any further sensible decline in the value of silver, since 
most commodities have been procurable for the same metal-price. 
It will be sufficient, therefore, to reduce them into the money current 
for the time being, according to the then current value of the mark 
of fine silver.! 

* Until the period specified, the ratio of gold to silver in Europe was 1 to 12. 
At present, it is in most nations of Europe 1 to 14, or 1 to 15 ; so that taking 
the average ratio in ancient times at 1 to 11 1-4 and in modern times at 1 to 15, 
gold will have increased in relative value to silver in the proportion of 4 to 3. 
Wherefore, if gold be multiplied by 3, and silver by 4, the result will be equal. 

+ I am disposed to believe, that the value of both gold and silver began again 
to decline about the commencement of the present century ; for more gold and 
silver are now , given for most of the commodities least liable to vary in the 
costs of production. (1) 

(1) In the very able and laborious " Historical Inquiry into the Production 
and Consumption of the Precious Metals, by William Jacobs, Esq. F.R.S. Lon- 
don, 1831," we are furnished with a chapter (xxv.) on the production of gold 



CHAP. XXI. ON PRODUCTION. 257 

By way of illustration, let us take the statement we find in the 
Memoirs de Sully, viz. that this minister accumulating, in the vaults 
of the Bastile, a sum of 36 millions of livres tournois, to further the 
designs of his master against the house of Austria. If we wish to 
know the actual value of that hoard, we must, in the first place, 
examine what weight of fine silver it amounted to. The mark of 
fine silver was then represented by 22 livres tournois; consequently 
36 millions of livres make 1,636,363 marks, 5 oz. of silver. There 
has been no sensible variation in the value of that metal since the 
period in question; for the same quantity of metal would then buy 
the same quantity of wheat as at present. Now, at the present time, 
1,636,363 marks, 5 oz., or, in other terms, 399,588,018, 5 grammes 

and silver from the end of the year 1809 to the end of 1829. The author re- 
marks, " that it was at the first named period, 1809, when a great change took 
place in the production of the mines of gold and silver, in every part of the 
western continent, after a space of more than three centuries, during the whole 
of which there had been a constant increase of the quantities obtained ; each 
succeeding decennial period yielding a larger portion than the similar number 
of years that preceded it; and though they have in some measure been restored, 
it has been by slow degrees, and they are yet very far from having approached 
the copious produce which they yielded before their general abruption from 
European government." 

After then examining the productiveness of the mines of Mexico, Colombia, 
including New Granada, Peru, Buenos Ayres, Chili, and Brasil, in gold and 
silver, and also after taking notice of the gold found in North and South Caro- 
lina and Georgia, from 1824 to 1830, he sums up the whole of the amount of 
the gold and silver supplied by the late Spanish dominions in America, during 
the twenty years, from the end of the year 1809 to the end of 1829, thus : — 

Divisions. Amount in dollars in twenty years. 

Mexico, - - - 220,043,200 

Guatimala, - - - 2,893,710 

Colombia, - - - 33,564,267 

Peru, .... 64,688,429 

Buenos Ayres, - - 30,000,000 

Chili, .... 16,618,880 



367,808,486 



Or in sterling, at 4s. 2rf. the dollar, /.76,626,768 
To this may be added the produce of 

Brasil, 4,110,000 

Whole produce of America, - - /.80,736,768 



"In Europe," he states, likewise, "the produce of gold and silver has de- 
clined, when the average of the last twenty years is compared with that of the 
one hundred and ten years which preceded it. The value of the gold produced 
in Europe, he estimates about 720,000/., and of the silver 530,000i., being to- 
gether 1,250,000/. annually, or in the period of twenty years from 1810 to 1829, 
23 millions ; to this the supply from America, 86,736,768/., will make toge- 
ther, 103,736.768 pounds sterling." Mr. Jacobs estimates the diminution in 
the mass of metallic money, during the twenty years mentioned, at 13 per cent. 

American Editor. 
33 



258 ON PRODUCTION. book i 

of fine silver, coined into money, will make exactly 88,797,315 fr. 
or 16,516,300 dollars. A sum, indeed, that would go no great way 
in modern warfare; but it must be considered, that war is now con- 
ducted on a very different principle, and has become infinitely more 
wasteful, in reality as well as in name. 



Section VIII. 

Of the Absence of any fixed ratio of Value between one Metal 

and another. 

The same error, which led public functionaries to believe, that 
they could fix the relative value of any metal to commodities, has 
also induced them to determine by act of law the relative value of 
the metals employed as money, one to the other. Thus, it has been 
arbitrarily enacted, that a given quantity of silver shall be worth 24 
liv., and that a given quantity of gold shall likewise be worth 24 liv. 
In this manner, the ratio of the nominal value of gold to that of sil- 
ver came to be legally established. 

The pretension of authority was in both cases equally vain and 
impotent; and what has been the consequence? The relative value 
of the two metals to other commodities has, in fact, been constantly 
fluctuating, as well as the relative value of the metals themselves, 
when exchanged one for the other. Before the re-coinage of gold, 
in pursuance of the arret of 13th October, 1785, the louis d^or was 
commonly sold for 25 liv. and some sous of the silver coin. Con- 
sequently, people took good care -not to pay in gold coin the sums 
bargained for in silver; otherwise they would really have paid 25 
liv. and 8 or 10 sous, for every 24 liv. of the sums stipulated. 

Since the recoinage in 1785, when the quantity of gold in the 
louis d'or was reduced by one-sixth, its value has nearly kept pace 
with that of 24 liv. in silver; so that gold and silver have been paid 
indifferently. However, it has still continued most customary to 
pay in silver, partly from long habit, and partly because the gold 
coin, beingmoreliableto be clipped or counterfeited,was received with 
more caution and liable to more frequent cavils about the weight and 
quality. 

In England a difierent arrangement has produced an efiect directly 
contrary. In the year 1728, the natural course of exchange fixed 
the relative value of gold to silver as 15 9-124 to 1; say 15 1-14 to 
1, for the sake of simplicity; 1 oz. of gold was sold for 15 1-14 oz. 
of silver, and vice versa. Accordingly, that ratio was established by 
law, 1 oz. of gold being coined into the nominal sum of 3/. 17*. 
lOhd. and 15 1-14 oz. of silver into the same sum. Thus, the 
government attempted permanently to fix a ratio, that is, in the 
nature of things, perpetually varying. The demand for silver gra- 
dually increased; its use for plate and other domestic purposes 
became more general; the India trade received an additional stimulus, 



CHAP. XXI. ON PRODUCTION. 259 

and took off silver in preference to gold, for this reason, that the 
relative value of silver to gold is higher in the East than in Europe; 
so that, by the end of the last century, the ratio of these metals one 
to the other in England became about 14^ to 1 only; and the same 
qiuntity of silver, that was coined into 3/. 175. lO'^d., would then 
sell in the market for 4/. in gold. There was thus a profit on melt- 
ing down the silver, and a loss on payments in that metal; for which 
reason, thenceforward, until the parliamentary suspension of specie 
payments by the Bank of England 1797, payments of course were 
commonly made in gold. 

Since 1797, all payments have been made in paper. But, if 
England shall return to a metallic currency, framed upon the former 
monetary principles and regulations, it is probable that payments 
will be made in silver instead of gold, as before the suspension; for 
gold has risen in relative price to silver in the English market, pro- 
bably in consequence of the large export of specie for commercial 
purposes, and greater difficulty of prevention in gold than in silver. 
Gold bullion in the English market is now to silver bullion in the 
ratio of about 1 to 151, although the mint ratio is still 1 to 15 1-14. 
A payment in gold instead of silver would therefore be a gratuitous 
sacrifice of the difference between 15 1-14 and 15^. 

Hence may be drawn this conclusion; that it is impossible in 
practice to assign any fixed ratio of exchangeable value to comtno- 
dities, whose ratio is for ever fluctuating, and, therefore, that gold 
and silver must be left to find their own mutual level, in the tran- 
sactions in which mankind may think proper to employ them.* 

The above remarks upon the relative value of gold and silver are 
equally applicable to silver and copper, as well as to all other metals 
whatever. There is no more propriety in declaring, that the copper 
contained in twenty sous shall be worth the silver contained in a 
livre tourjiois, than in enacting, that the silver contained in 24 liv. 
tou7'nois shall be worth the gold in a louis (for. However, little 
mischief has been occasioned by fixing the ratio of copper to the 
precious metals, because the law does not authorize the payment of 
sums stipulated in livres tournois and francs in either copper or 
the precious metals indifferently; so that, in reality, the only metal 
money recognised by law as legal tender, for sums above the value 
of the lowest denomination of silver coin, is silver or gold. 

* Tlie relative position of gold and silver, in respect to value, is by no means 
determined by the respective supply of each from the mines. Humboldt states, 
in his Essal Pol. sur la Nouvelle Espagtie, torn. iv. p. 222, oct., that silver is 
produced from the mines of America and Europe jointly, in the ratio to gold, of 
45 to I. Now the ratio of their value, instead of being 45 to 1, is only, 
In Mexico, - - 15 5-8 - - to 1 
France, - - - 15 1-2 - - - 1 
China, - from 12 to 13 - - 1 

Japan, - - -8 to 9- - - 1 
The difference is probably owing to the superior utility and demand of silver for 
the purposes of plate, &c. as well as of money. It would seem, that this cause 
operates more forcibly in the East than in the West ; for gold jewellery is rela- 
tively cheaper there than in our part of the world. 




260 ON PRODUCTION. book i. 

Section IX. 
Of Money as it ought to be. 

From all that has been said in the preceding sections may be 
inferred my opinion of what money ought to be. 

The precious metals are so well adapted for the purposes of 
money, as to have gained a preference almost universal; and, as no 
other matei'ial has so many recommendations, no change in this 
particular is desirable. 

So also of their division into equal and portable particles. They 
may very properly be coined into pieces of equal weight and quality 
as has heretofore been the practice among most civilized nations. 

Nor can there be any better contrivance, than the giving them 
such an impression, as shall certify the weight and quality; or than 
the exclusive reservation to governm.ent of the right of impressing 
such certificate, and, consequently, of coining money, for the certi- 
ficate of a number of coiners, all working together and in competi- 
tion one with the other, could never give an equal security. 

Thus far, then, and no further, should the public authority inter- 
meddle with the business of money. 

The value of a piece of silver is arbitrary, and is established by 
a kind of mutual accord on every act of dealing between one indi- 
vidual and another, or between the government and an individual. 
Why, therefore, attempt to fix its value beforehand? since, after all, 
the fixation must be imaginary, and can never answer any practical 
purpose, in the money transactions of mankind. Why give a deno- 
mination to this fixed, imaginary value, which money can never 
possess? For what is a dollar, a ducat, a florin, a pound sterling, or 
a franc; what, but a certain weight of gold or silver of a certain 
established standard of quality? And, if this be all, why give these 
respective portions of bullion any other name, than the natural one 
of their weight and quality? 

Five grammes of silver, says the law, shall be equivalent to a 
franc: which is just as much as to say, 5 grammes of silver is 
equivalent to 5 grammes of silver. For the only idea presented to 
the mind by the word franc, is that of the 5 gramrnes of silver it 
contains. Do wheat, chocolate or wax, change their name by the 
mere act of apportioning their weight? A pound weight of bread, 
chocolate, or of wax candles, is still called a pound w^eight of bread, 
chocolate or wax candles. Why, then, should not a piece of silver, 
weighing 5 grammes, go by its natural appellation? Why not call 
it simply 5 gram.mes of silver? 

This slight alteration, verbal, critical, and nugatory as it may 
seem, is of immense practical consequence. Were it once admitted, 
it would be no longer possible to stipulate in nominal value: every 
bargain would be a barter of one substantial commodity for another, 



CHAP. XXI. ON PRODUCTION. 261 

of a given quantity of silver for a given quantity of grain, or butch- 
er's meat, of clotli, &c. &c. Whenever a contract for a long pro- 
spective period was entered into, its violation could not escape de- 
tection: a person taking an obligation to pay a given quantity of 
fine silver, at a day certain, would know precisely how much silver 
he would have to receive at the period assigned, provided his debtor 
continued solvent. 

The whole monetary system would thenceforth fall to the ground; 
a system replete with fraud, injustice, and robbery, and moreover so 
complicated, as rarely to be thoroughly understood, even by those 
who make it their profession. It would ever after be impossible to 
effect an adulteration of the coin, except by issuing counterfeit mo- 
ney; or to compound with creditors, without an open, avowed bank- 
ruptcy. The coinage of money would become a matter of perfect 
simplicity, a mere branch of metallurgy. 

The denominations of weight, in common use before the intro- 
duction into France of the metrical system, that is to say, the once, 
gros, grain, had the advantage of conveying the notion of portions 
of weight, that had remained stationary for many ages, and were 
applicable to all commodities whatever, without distinction: so that 
the once could not be altered for the precious metals, without alter- 
ing it at the same time for sugar, honey, and all commodities sold 
by the weight: but, in this particular, the new metrical system is 
infinitely preferable. It is founded upon a basis provided by nature, 
which must remain invariable as long as our world shall last. The 
gramme is the weight of a cubic centimetre of water: the centime- 
tre is the hundredth part of a metre, and the metre is 1-10,000,000 
part of the arc foi'med by the circumference of the earth, from the 
pole to the equator. The term gramme may be changed, but no 
human power can change that portion of weight actually designated 
by the term gramme; and whoever shall contract to pay at a future 
date a quantity of silver, equal to 100 grammes weight, can never 
pay a less quantity of silver, without a manifest breach of faith, 
whatever arbitrary measures of power may intervene. 

The power of a government to facilitate the transactions of ex- 
change and contract, wherein the commodity money, is employed, 
consists in dividing the metal into different pieces of one or more 
grammes or centigrammes, in such manner, as to admit of instant 
calculation of the number oi grammes a given payment will require. 

It has been ascertained by the experiments of the Academy of 
Sciences, that gold and silver resist friction better with a slight mix- 
ture of alloy, than in a pure state. People versed in these matters 
say, besides, that this complete purity cannot be obtained, without 
a very expensive chemical process: that would add greatly to the 
expense of coinage. There is no sort of objection to mixing alloy, 
provided the proportion be signified by the impression, which should 
be nothing more than a mere certificate of the weight and quality of 
the metal. 

I make no mention of the terms franCj decime, centime, because 



262 ON PRODUCTION. book i. 

those names should never have been given to the coin, being, in fact, 
names indicative of nothing whatever. The laws of France, instead 
of enacting that pieces called /?'ancs, shdll be coined, having the 
weight of 5 grammes of silver, should have simply ordered a coin- 
age of pieces of 5 gramm,es. In which case, a letter of credit or 
bill of exchange, instead of being drawn for, say 400 fr., would be 
for 2000 grammes of silver of the standard of 9-10 silver to 1-10 
alloy; or if preferred, for 130 grammes of gold of the same degree 
of purity; and the payment would be the most simple imaginable; 
for the pieces of coin, gold and silver, would be all fractions or 
multiples of the gramme of metal of .that standard. 

However, it would still be necessary to enact, that no sum stipu- 
lated in gram^nes of silver or gold should be payable otherwise than 
in coin, unless under a special proviso; else, the debtor might dis- 
charge all claims in bullion of somewhat less value than coin. This 
is obviously matter of practical arrangement; the principle requiring 
nothing, but that the obligation, after mentioning the metal and 
standard, should specify on the face of it, whether payable in na- 
tional coin or bullion. The only object of such a law would be, to 
save the continual necessity of enumerating many particulars that 
would thenceforward be implied. 

A government should never coin the bullion of private persons, 
without charging the profit, as well as the cost of the operation. 
The monopoly of coinage will enable it to make this profit some- 
what high: but it should be varied according to the state of me- 
tallurgic science, and the demand for circulation. Whenever the 
state has little to coin on its own account, it had better lower its 
charges, than let its machinery and workmen remain idle, and, on 
the other hand, raise its charges, when the influx of bullion is rapid 
and superabundant. And in this, it would but imitate other manu- 
facturers. As to the bullion bought and coined by government on 
its own account, the coin issued would reimburse the charges; and 
yield a profit by its superior value in exchange; as I have endea- 
voured to prove above in Section IV. 

To the marks indicative of weight and quality, should of course 
be superadded every device to prevent counterfeits, 

I have not occupied my reader's time with any observations on 
the relative proportion of gold to silver; nor was there any occasion 
to do so. Having avoided any specification of their value under 
any particular denomination, I shall pay no more attention to the 
alternating variations of that value, than to the fluctuations of the 
relative value of both to all other commodities. This must be left 
to regulate itself; for any attempt to fix it would be vain. With 
regard to obligations, they would be dischargeable in the terms of 
contract: an undertaking to pay 100 grammes of silver would be 
discharged by the transfer of 100 grammes of silver; unless, at the 
time of payment, by mutual consent of the contracting parties, any 
other metal, or goods at a rate agreed on, should be substituted in 
preference. 



CHAP. XXI. ON PRODUCTION. 263 

It would be difficult to calculate the advantage, that would accrue 
to industry in all its branches, from so simple an arrangement; but 
some notion of it may be obtained, by considering the mischiefs that 
have resulted from a contraiy system. Not only has the relative 
pecuniary position of individuals been repeatedly overset, and the 
best planned and most beneficial productive enterprises altogether 
thwarted and rendered abortive; but the interests of the public, as 
well as of private persons, are, almost every where, subject to daily 
and hourly aggression. 

A medium, composed entirely of either silver or gold, bearing a 
certificate, pretending to none but its real intrinsic value, and, conse- 
quently exempt from the caprice of legislation, would hold out such 
advantages to every department of commerce, and to every class of 
society, that it could not fail to obtain currency even in foreign 
countries. Thus, the nation, that should issue it, would become a 
general manufacturer pf money for foreign consumption, and might 
derive from that branch of manufacture no inconsiderable revenue. 
We read in Le Blanc,* that a particular coin issued by St. Louis, 
and called agnds (Tor, from the figure of a lamb impressed upon 
them, was in great request even among foreigners, and a favourite 
money in commercial dealings, for the sole reason that it invariably 
contained the same quantity of gold, from the rqign of St. Louis to 
that of Charles VI. 

Should France be so fortunate as to make this experiment, I hope 
none of those who do me the honour to read this work, wall feel any 
regret at the drain of its money, to use the expression of certain 
persons, who neither know nor choose to learn any thing of the 
matter. It is quite clear, that neither silver nor gold coin will go 
out of the kingdom, without leaving behind a value fully equivalent 
to the metal and the fashion it bears. The trade and manufacture of 
jewellery for export are considered lucrative to the nation; yet they 
occasion an outgoing of the precious metals. The beauty of the 
form and pattern adds, to be sure, greatly to the price of the metal 
thus exported; but the accuracy of assay and weight, and, above all 
things, the maintenance of the coin at an invariable standard of 
weight and quality, would be an equal recommendation, and would 
undoubtedly be just as well paid for. 

Should it be objected, that the same system was adopted by 
Charlemagne, when he called a pound of silver a livre, and that 
notwithstanding the coin has been since repeatedly deteriorated, 
until, at last, what was called a livre, contained, in fact, but 96 gr., 
I answer: 

1. That, neither in the time of Charlemagne, nor at any subse- 
quent period, has there ever been a coin containing a pound of 
silver; that the livre has always been a money of account, an ideal 
measure. The silver coin of Charlemagne and his successors, con- 
sisted of sols of silver, the sol being a fractional part of the pound 
weight. 

* Traite Hist, des Monnaies de la France, Prolcgoni. p. 4. 



264 ON PRODUCTION. book i. 

2. None of the coin has ever borne on the face of it the indication 
of the weight of metal it contained. There are extant in the col- 
lections of medals many pieces coined in the reign of Charlemagne. 
The impression was nothing more than the name of the monarch, 
with the occasional addition of the name of the town where the coin 
was struck, executed in very rude characters; which, indeed, is not 
to be wondered at, considering that the monarch, though an avowed 
patron of literature, was himself unable to write. 

3. The coin was yet further from bearing any thing indicative of 
the standard quality of the metal, and this was the thing first 
encroached upon; for the sol in the reign of Philip I. still contained 
the same fractional weight of the livre as originally; but it was made 
up of 8 parts of silver to 4 copper, instead of containing, as under 
the second race of monarchs, 12 oz. of fine silver, which was the 
then weight of the livre. 

The very singular state of the actual money of England, and the 
extraordinary circumstances, that have occurred in respect to it 
since the first editions of this work appeared, have given a decisive 
proof, that the mere want of an agent of circulation, or, of the com- 
modity, money, is sufficient to support a paper-money absolutely 
destitute of security for its convertibility at a high rate of value, or 
even at a par with metal, provided it be limited in amount to the 
actual demand of circulation.* Whence some English writers of 
great intelligence in this branch of science have been led to con- 
clude, that, since the purposes of money call into action none of the 
physical and metallic properties of its material, some substance less 
costly than the precious metals, paper, for instance, may be employed 
in them with good efiect, if due attention be paid to keep the amount 
of the paper within the demands of circulation. The celebrated 
Ricardo, has, with this object, proposed an ingenious plan, making 
the Bank or corporate body, invested with the privilege of issuing 
the paper-money, liable to pay in bullion for its notes on demand. 
A note, actually convertible on demand into so much gold or silver 
bullion, can not fall in value below the value of the bullion it pur- 
ports to represent; and, on the other hand, so long as the issues of 
the paper do not exceed the wants of circulation, the holder will 
have no inducement to present it for conversion, because the bullion, 
when obtained, would not answer the purposes of circulation. If a 
casual interruption of confidence in the paper should bring it for 
conversion in too large quantity, the paper remaining in circulation 
must rise in value, in the absence of any other circulating medium, 
and there would be an inducement to bring bullion to the bank to be 
converted into paper.t 

* Vide our author's pamphlet, entitled, de VAngkterre, et des Anglais, 1815, 3d 
edition, p. 50, et seq. 

t Proposals for an economical and secure Currency, by D. Ricardo, 1816. It 
seems, the British legislature has since adopted the expedient of that writer, in 
1819, The experiment is yet in progress ; and whatever be its ultimate result, 
it must needs advance the interests of the science. 



CHAP. XXI. ON PRODUCTION. 265 

Section X. 
Of a Copper and Base Metal'' Coinage. 

The copper coin and that of base metal, are not, strictly speaking 
money; for debts can not be legally tendered in this coin, except 
such fractional sums, as are too minute to be paid in gold or silver 
Gold and silver are the only metal-money of almost all commercial 
nations. Copper coin is a kind of transferable security, a sWxx or 
representative of a quantity of silver too diminutive to be worth the 
coinage; and, as such, the government, that issues it, should always 
exchange it on demand for silver, when tendered to an amount equal 
to the smallest piece of silver coin. Otherwise, there is no security 
against the issue of an excess beyond the demand of circulation. 

Whenever there is such an excess, the holders, finding the base 
metal less advantageous than the gold and silver it represents but 
does not equal in value, would strive to get rid of it in every way; 
whether by selling to a loss, or by employing it in preference to pay 
for low-priced articles, which would consequently rise in nominal 
price; or by proffering it to their creditors in larger quantity, than 
enough to make up the fractional parts of sums in account. The 
government, having an interest in preventing its being at a discount, 
because that would reduce the profit upon all future issues, generally 
authorizes the latter expedient. 

Before 1808, for instance, it was a legal tender at Paris to the 
extent of 1-40 of every sum due; which had exactly the same effect 
as a partial debasement of the national currency. Every body knew' 
when a bargain was concluded, that he was liable to be paid in pro- 
portion of 1-40 copper or brass metal, to 39-40 silver, and made his 
calculation accordingly, on terms proportionably higher, than if no 
such regulation had existed. It is with this particular, precisely 
as with the weight and standard of the silver coin; sellers do not 
stop to weigh and assay every piece they receive, but the dealers in 
gold and silver, and those connected with the trade, are perpetually 
on the watch to compare the intrinsic, with the current, value of the 
coin; and, whenever their values differ, they have an opportunity of 
gain; their operations to obtain which, have a constant tendency to 
put the current value of the coin on a level with its real value. 

The obligation to receive copper in any considerable proportion, 
has, in like manner, an influence upon the"exchange with foreigners. 
There is no question, that a letter of exchange on Paris payable in 
francs is sold cheaper at Amsterdam, in consequence of the liability 
to receive part payment in copper or base metal; just as it 

* Billon, a compound of copper and silver, containing 1-4 or 1-2 only of the 
latter, and the residue of the former. It is used in the fractional coinage of 
France, to supersede the employment of copper in large quantities. 



266 ON PRODUCTION. book i. 

would be, \i\he franc were made to contain less of silver and more 
of alloy. 

Yet, it is to be observed, that, on the whole, the value of money is 
not so much affected by this circumstance, as by the mixture of 
alloy; for the alloy has positively no value whatever, for the reasons 
above stated;'* whereas, the copper money, payable in the ratio of 
1-40, had a sniall intrinsic value, though inferior to the sum in silver, 
it was made to pass for: had it been of equal value, there would have 
been no occasion for an express law to give it currency. 

As long as a government gives silver on demand for the copper 
and base metal regularly presented, it can with little inconvenience 
give them very trifling intrinsic value; the demand for circulation 
will always absorb a very large quantity, and they will maintain 
their value as fully, as if really worth the fractional silver represented; 
on exactly the same principle, as a bank-note passes current, and that 
too for years together, without any intrinsic value, just as well as if 
really Avorth the sum it purports on the face of it to contain. In this 
manner, such a coinage can be made more profitable to the govern- 
ment than by any compulsion to receive it in part payment; and the 
value of the legal coin will suffer no depreciation. The only danger 
is that of counterfeits, which there is the strongest stimulus for 
avarice to fabricate, in proportion as the difference between the 
intrinsic, and the current value, grows wider. 

The last King of Sardinia's predecessor, in attempting to with- 
draw from circulation a base currencj?^, issued by his father in a period 
of calamity, had more than thrice the quantity originally issued by 
the government thrown upon his hands. The same thing happened 
to the king of Prussia, when, under the assumed name of the Jew 
Ephraim, he withdrew the base coin he had compelled the Saxons 
to receive, during his distresses in the seven years' war;t and for 
exactly the same reason. Counterfeits of the coin are usually 
executed beyond the national frontier. In England it was attempted 
to remedy this evil in the year 1759, by a coinage of half-pence 
with a very fine impression, and executed with an attention and per- 
fection, that counterfeiters can rarely bestow. 



Section XI. 

Of the preferable Form of Coined Money. 

The wear of the coin by friction is proportionate to the extent of 
its surface. Of two pieces of coin of equal weight and quality that 
will suffer least from continual use, which offers the least surface to 
the friction. 

The spherical or globular form is, consequently, preferable in this 

* Supra, p. 170. 

f Mongez, Consider, sur les Monnaies, p. 31. 



CHAP. XXI. ON PRODUCTION. 267 

respect, as least liable to wear; but it has been rejected on account 
of its inconvenience. 

Next to this form, the cylinder, of equal depth and breadth is 
that, which exposes the smallest surface; but this is fully as incon- 
venient as the other; the form of a very flat cylinder has, conse- 
quently, been very generally adopted. However, from what has 
been already said, it will appear, that the less it is flattened the bet- 
ter; and that the coin should rather be made thick than broad. 

With regard to the impression, the chief requisites are, 1. That it 
specify the weight and quality of the piece; 2. That it be very dis- 
tinct, and intelligible to the meanest capacity; 3. That the die oppose 
all possible difficulties to the defacing or reducing of the coin; that 
is to say, that it be so contrived, that neither the ordinary wear nor 
fraudulent practices should be able to reduce the weight without des- 
troying the impression. The last coined English half-pence have a 
cord, not projecting, but indented in the thickness of the circumfer- 
ence, and occupying the central part of the circumference only, so as 
to make it liable neither to clipping nor wear. This mode might be 
adopted in the silver and gold coinage with certainty and success; 
and it is of much more consequence to prevent their deterioration. 

When the impression is in basso relievo, it should project but 
little, for the convenience of piling the pieces one upon another, 
as well as to reduce the friction. On the same account a pro- 
jecting impression should not be too sharp on the surface, or it 
would wear away too rapidly. With a view to prevent this, expe- 
riments have been made of dies executed in alto relievo; but 
it was found that the coin was thereby too much weakened, and 
liable to be bent or broken. This plan, however, might possibly be 
practised with advantage, if the pieces were secured by greater 
thickness. 

The same motive of giving to the coin the least possible surface, 
should induce the government to issue as large pieces as convenience 
will admit; for the more pieces there are, the greater is the surface 
exposed to friction. No more small pieces of coin should be issued, 
than just enough to transact exchanges of small amount, and to pay 
fractional sums. All large sums should be paid in large pieces of 
coin. 



Section XII. 

Of the Parly, oh whom the. Loss of the Coin by IVear should pro- 
perly fall. 

It has been a question, who ought to defray the loss, consequent 
upon the friction or wear of the coin? In strict justice, the person 
who had made use of it, in like manner as the wearer of any other 
commodity. A man, that re-sells a coat after having worn it, sells 
it for less than he gave for it when new. So a man, that sells a 



268 ON PRODUCTION. book i. 

crown-piece for some other commodity, should sell it for less than 
he gave; that is to say, should receive a smaller quantity of goods 
than he obtained it with. 

But the portion of a specific coin, consumed in its passage through 
the hands of any one honest person, is less than almost any assigna- 
ble value. It may circulate for many years together, without any 
sensible diminution of its weight; and, when the diminution is dis- 
covered, it may be impossible to tell, by which of the innumerable 
holders it was effected. I am aware, that each of them has imper- 
ceptibly shared the depreciation of its exchangeable value, occasioned 
by the wear; that the quantity of goods it would purchase has 
declined by an insensible gradation; that, although the depreciation 
has been imperceptibly progressive, it becomes at last very manifest; 
and that worn money will not be taken at par with new coin. Con- 
v sequently, I think, that, if an entire class of coin, were gradually so 
reduced as to make a re-coinage necessary, its holders could not in 
reason expect that their reduced coin should be exchanged for new 
at par, piece for piece. Their money should be received, even by 
the government, at no more, than its real value; the silver it contains 
is less in quantity than at the first issue; and it has been received by 
the holders at a lower rate of value; they have given for it less goods 
than they would have done in the outset. 

In fact, this is the course that rigid justice would prescribe; but 
there are two reasons, why it should not be strictly enforced. 

1. Each individual piece of coin is not, if I may be allowed the 
expression, a substantive article of commerce. Its exchangeable 
value is calculated, not according to the weight and quality of the 
identical piece in question, but according to the average weight and 
quality of the coin in large quantities, as ascertained by common 
experience. A crown piece of an earlier date, and more worn, is 
yet freely received in exchange for one more new and perfect; the 
difference is sunk in the average. The mint issues new pieces every 
year of the full weight and standard, which prevents the coin from 
declining sensibly in value, in consequence of the friction, even for 
many years after its issue. 

This circumstance is illustrated by the fact, of the French pieces 
of 12 and 24 sous passing current at par with the crown-pieces of 6 
livres- wiihoni any difficulty; although the same nominal sum, in 
the shape of the worn pieces of 12 and 24s., contained in reality 
about i less silver than the crown-piece. 

The subsequent law, which prohibited their being taken by the 
public receivers or private persons at more than 10 and 20 sous, 
rated them at their full intrinsic value, but below the rate, at which 
the then holders had taken them. For their value had been pre- 
viously kept up to 12 and 24 sous in spite of the wear, by reason of 
their passing current at par with the crown-piece-. Thus, the last 
holder was saddled with the entire loss of a friction, to which the 
innumerable hands they had passed through had all contributed. 
2. The impression is equally effectual in giving currency at the 



CHAP. XXI. ON PRODUCTION. 269 

last as at the first, although it becomes in course of time scarcely, if 
at all visible; witness the shillings of England. The coin derives, 
as above explained, a certain degree of value from the mere im- 
pression, which value has been admitted and recognised throughout, 
until it reaches the ultimate holder, who has in consequence received 
it at a higher rate, than he would a piece of blank bullion of equal 
weight. To saddle him with the difference, would be to make him 
lose the whole value of the impression, although it has been equally 
serviceable to perhaps a million of others. 

On these grounds, I am inclined to think, the loss by wear, and 
that of the impression, should be borne by the community at large; 
that is to say, by the public purse: for the whole society derives the 
benefit of the money; and it is impossible to tax each individual, in 
the precise proportion of the use he has made of it. 

To conclude; every individual, that carries bullion to the mint to 
be coined may be fairly charged the expenses of the process, and, if 
thought advisable, the full monopoly-profit. Thus far there is no 
harm done: his bullion is increased in value to the full amount of 
what he has been charged by the mint; otherwise, he would never 
have carried it thither. At the same time, I am of opinion, that the 
mint should always give a new piece in exchange for an old one on 
demand: which need nowise interfere with the utmost possible pre- 
cautions against the clipping and debasing of the coin. The mint 
should refuse such pieces, as have lost certain parts of the impression, 
which are not liable to fair and unavoidable wear; and the loss in 
that case should fall on the individual, careless enough to take a 
piece thus palpably deficient. The promptitude, with which the 
public would take care to carry injured or suspicious pieces to the 
mint, would greatly facilitate the detection of fraudulent practices. 

With diligence on the part of the executive, the loss arising from 
this source might be reduced to a mere trifle, and the system of na- 
tional money would be materially improved, as well as the foreign 
exchange. 



CHAPTER XXII. 

of signs or representatives of money. 

Section 1. 

Of Bills of Exchange and Letters of Credit. 

A BILL of exchange, a promissory note or check, and a letter of 
credit are written obligations to pay, or cause to be paid, a sum of 
money, either at a future time, or at a different place. 



270 ON PRODUCTION. book i. 

The right conveyed by the assignment of these engagements, 
though not capable of being enforced immediately, or elsewhere 
than at the stipulated place, yet gives them an actual value, greater 
or less, according to circumstances. Thus a bill of exchange for 100 
dollars, payable at Paris at two months' date, may be negotiated or 
sold, at pleasure, at the rate of, say 99 dollars, while a letter of credit 
of like amount, payable at Marseilles in the same space of lime, will, 
perhaps, be worth at Paris but 98 dollars. 

These engagements may be used as money in all transactions of 
purchase, as soon as they are invested with actual present value, by 
the prospect of their future value; indeed, most of the greater 
operations of commerce are effected through the medium of these 
securities. 

Sometimes, the circumstance of a bill of exchange being payable 
at another place will increase, instead, of diminishing its value; but 
this depends upon the state of commerce for the time being. If the 
merchants of Paris have large payments to make to those of London, 
they will readily give more money at Paris for a bill upon London, 
than it will produce to the holder at the latter place. Thus, although 
the pound sterling contain precisely as much silver as 24 fr. 74 
cents, they will, perhaps, give at Paris 25 fr., more or less, for every 
pound sterling payable in London.* 

This is what is called the course of exchange, being, in fact, a 
mere specification of the quantity of precious metal people will con- 
sent to give, for the transfer of a right to receive a given quantity 
of the same metal at any other specified place. The particular 
locality of the metal reduces or increases its value, in relation to the 
same metal situated elsewhere. 

The exchange is said to be in favour of any country, France, for 
example, whenever less of the precious metal is there given for, than 
will be produced by, a bill of exchange upon another country; or 
whenever in the foreign country more of the precious metal is given 
for a bill of exchange on France, than it will there produce to the 
holder. The difference is never very considerable, and cannot ex- 
ceed the charge of transporting the precious metal itself; for, if a 
foreigner, who wants to make a payment at Paris, can remit the sum 
in specie at less expense than he could be put to by the existing 
course of exchange, he would undoubtedly remit in specie.! 

It has been imagined by some people, that all debts to foreigners 
can be paid by bills of exchange; and measures have been frequently 
suggested, and sometimes adopted, for the encouragement of this 
fictitious mode of payment. But this is a mere delusion. A bill 
of exchange has no intrinsic value; it can only be drawn upon any 

* If the credit on London be payable in paper-money instead of specie, the 
course of exchange with Paris of the pound sterling, may, perhaps, fall to 21 /r., 
18/>-., or even less, in proportion to the discredit of the paper of England. 

f In that expense I include the charge and risk of transport and of smuggling 
also, if the export of specie be prohibited ; which latter is proportionate to the 
difficulty of the operation. The risks are estimated in the rate of insurance. 



CHAP. XXII. ON PRODUCTION. 271 

place for a sum actually due at that place; and no sum can be there 
actually due, unless an equal value, in some shape or other, has been 
remitted thither: the imports of a nation can only be paid by the 
national export; and vice versa. Bills of exchange are a mere re- 
presentative of sums due; in other wordg, the merchants of one 
country can draw bills on those of another for no more, than the 
full amount of the goods of every description, silver and gold in- 
cluded, which they may have sent thither directly or indirectly. If 
one country, say France, have remitted to another country, Ger- 
many perhaps, merchandise to the value of 2 millions of dollars, and 
the latter have remitted to the former to the amount of 3 millions 
of dollars, France can pay as much as 2 millions by the means of 
bills of exchange, representing the value of her export; but the re- 
maining 1 million cannot be so discharged directly, although possi- 
bly they may by bills of exchange upon a third country, Italy, for 
instance, whither she may have exported goods to that extent. 

There is, indeed, a species of bills, called by commercial men, 
accommodation-paper, which actually represents no value whatever. 
A merchant at Paris, in league with another of Hamburgh, draws 
bills upon his correspondent, which the latter pays or provides for, 
by re-drawing and negotiating or selling bills at Hamburgh upon 
his correspondent at Paris. So long as these bills are in possession 
of any third person, that third person has advanced their value. 
The negotiation of such accommodation-paper is an expedient for 
borrowing, and a very expensive one; for it entails the loss of the 
banker's commission, brokerage and other incidental charges, over 
and above the discount for the time the bills have to run. Paper of 
this description can never wipe out the debt, that one nation owes 
another; for the bills drawn on one side balance and extinguish those 
on the other. The Hamburgh bills will naturally counterpoise those 
of Paris, being in fact drawn to meet them; the second set destroys 
the first, and the result is absolute nullity. 

Thus it is evident, that one nation cannot otherwise discharge its 
debts to another, than by remittance of actual value in goods or 
commodities, in which term I comprise the precious metals, amongst 
others, to the full amount of what it has received or owes. If the 
actual values directly remitted thither are insufficient to balance the 
receipts or imports thence, it may remit to a third nation, and thence 
transport produce enough to make up the deficit. How does France 
pay Russia for the hemp and timber for ship-building imported 
thence? By remittance of wines, brandies, silks, not merely to 
Russia, but, likewise to Hamburgh and Amsterdam, whence again a 
remittance of colonial and other commercial produce is forwarded 
to Russia. 

Governments have commonly made it their object to contrive 
that the precious metals shall form the largest possible portion of 
the national import from, and the least possible portion of the na- 
tional export to, foreign countries. I have already taken occasion 
to remark, with regard to what is improperly called the balance of 



272 ON PRODUCTION. book i. 

trade, that, if the national merchant finds the precious metals a more 
profitable foreign remittance than another commodity, it is likewise 
the interest of the state to remit in that form; for the state can only 
gain and lose in the persons of its individual subjects; and, in the 
matter of foreign commerce, whatever is best for the individuals in 
the aggregate, is best for the state also.* Thus, when impediments 
are thrown in the way of the export of the precious metals by in- 
dividuals, the effect is to compel an export in some other shape, less 
advantageous to the individual and the public too. 



Section II. 
Of Banks of Deposit. 

The constant intercourse between a small state and its neighbours 
occasions a perpetual influx of foreign coin. For, although the 
small state may have a national coinage of its own, yet, the frequent 
necessity of taking the foreign instead of the national coin in pay- 
ment, requires the fixation of the ratio of their relative value, in the 
current transactions of business. 

There are many mischiefs attending the use of foreign coin, 
arising chiefly from the great variation of weight and quality. It 
is often extremely old, worn, and defaced; not having participated 
in the general re-coinage of the nation that issued it, where, perhaps, 
it Js no longer current; all which circumstances, though considered 
in settling its current relative value to the local coin, yet, do not 
quite reduce it to the natural level of depreciation. 

Bills drawn from abroad upon such a state, being payable in the 
coin thus rendered current, are, in consequence, negotiated abroad 
at some loss; and those drawn upon foreign countries, and, conse- 
quently, payable in coin of a more steady and intelligible value, are 
negotiated in a smaller state at a premium, because the holder of 
them must have purchased them in a depreciated currency. In 
short, the foreign coin is always exchanged for the local currency to 
a loss. 

The remedy devised by states of this inferior class is the subject 
of the present section. They established banks,t where private 
merchants could lodge any amount of local national coin, of bullion, 
or of foreign coin, reckoned by the bank as bullion; and the amount, 

*^ This position applies to foreign commerce only ; the monopoly-profits of 
individuals in the home-market are not entirely national gains. In internal deal- 
ings, the sum of the utility obtained is all that is acquired by the community. 

f Venice, Genoa, Amsterdam, and Hamburgh had each an establishment of 
this nature. All have been swept away by the torrent of the revolutionary war; 
but there may be some use in examining the nature of institutions that may 
some day or other be re-established. Besides, the investigation will throw light 
upon the history of the communities that established them, and of commerce in 
general. At any rate, it was necessary to enumerate all the various expedients 
that have been resorted to as substitutes for money. 



CHAP. XXII. ON PRODUCTION. 273 

so lodged, was entered as so much money of the legal national 
standard of weight and quality. At the same time, the bank opened 
an account witli each merchant making such deposit, giving him 
credit for the amount of the deposit. Whenever a merchant wanted 
to make a payment, there was no occasion to touch the deposit at 
all; it was sufficient to transfer the sum required, from the credit of 
the party paying, to that of the party receiving. Thus values could 
be transferred continually by a mere transfer in the books of the 
bank. The whole operation was conducted without any actual 
transfer of specie; the original deposit, which was entered at the real 
intrinsic value at the time of making it, remained as security for the 
credit transferred from one person to another; and the specie, so 
lodged with the bank, was exempt from any reduction of value by 
wear, fraud, or even legislative enactment. 

The money still remaining in circulation, Avherever it was 
exchanged for the bank deposits, that is to say, for entries in the 
hank books, necessarily lost in proportion to the reduction of its 
intrinsic value. And this loss occasioned the difference of value, 
or agio at Amsterdam, between bank money and circulating money, 
which was on the average from 3 to 4 per cent in favour of the 
former. 

It will easily be imagined, that bills of exchange, payable in a 
currency so little liable to injury or fluctuation, must be negotiable 
on better than ordinary terms. In fact, it was observable, that on 
the whole, the course of exchange was rather in favour of the 
countries that paid in bank, and unfavourable to those that paid in 
circulating money only. 

The bank retained these deposits in perpetuity; for the re-issue 
would have been attended with serious loss; inasmuch as it would 
have been the same thing, as producing good money of the full 
original value, to be taken at par with the deteriorated circulating 
coin, which passes current for — not its intrinsic, but its average 
weight. The coin withdrawn from the bank would have been 
mixed up with the mass of circulation, and passed current at par 
with the rest. So that the withdrawing such deposits would have 
been a gratuitous sacrifice of the excess of value of bank above circu- 
lating money. 

This is the nature of banks of deposit; most of which combined 
other operations with the primary object of their institution; but of 
them I shall speak elsewhere. They derived their profits, partly 
from a duty levied upon every transfer, and partly from operations 
incident to, and compatible with their institution; as, for example, 
advances made upon a deposit of bullion. 

It is evident, that the inviolability of the deposit, confided to 
them, is essential to the success of such establishments. At 
Amsterdam, the four burgomasters, or municipal magistrates, were 
trustees for the creditors. Annually, on leaving otlice, they handed 
over the trust to their successors, who, after inspecting the account, 
and verifying it l)y the registers of the bank, bound themselves by 
35 ' " 



274 ON PRODUCTION. book i. 

oath, to surrender their charge inviolate to their successors in office. 
This trust was scrupulously executed from the first establishment of 
the bank in 1609 until 1672, when the forces of Louis XIV. pene- 
trated as far as Utrecht. The deposits were then faithfully restored 
to the individuals. It would seem to have been afterwards less 
scrupulously managed; for, when the French took possession of that 
capital in 1794, and called for a statement of the concern, it was 
found to be in advance of no less a sum than 10,624,793 florins to 
the India company, and to the provinces of Holland and West- 
Friezeland, which were wholly unable to repay it. In a country 
governed by a power without control or responsibility, it may be 
expected, that such a deposit would have been still more exposed to 
violation. («) 



Section III. 

Of Banks of Circulation or Discount, and of Bank-notes, or 
Convertible Paper. 

There is another kind of bank, founded on totally different 
principles; consisting of associated capitalists, subscribing a capital 
in transferable shares, to be employed in various profitable ways, 
but chiefly in the discount of promissory notes and bills of exchange, 
that is to say, the advance of the value of commercial paper not yet 
due, with the deduction of interest for the time it has to run, which 
is called, the discount. 

These companies, with a view to enlarge their capital and extend 
their business, commonly issue notes, purporting to bear a promise 
to pay to the bearer on demand, the gold or silver specified on the 
■■ face of them. Their security for the due discharge of these engage- 
ments is, the commercial paper held by the bank, and subscribed 
by individuals in solvent circumstances; for the company gives its 
notes in discount, or, what is the same thing, in purchase of this 
paper. 

The private commercial paper, indeed, having a term to run 
before it falls due, can not be available in discharge of notes payable 
on demand; for which reason, every well-conducted bank of circu- 
lation confines its advances of cash, or notes payable in cash on 

(a) Public banks of deposit are now quite obsolete, and will probably never 
be revived. In fact they are clumsy expedients, suited only to the early stages 
of commercial prosperity, and are liable to many inconveniences. They hold 
out a strong temptation to internal fraud and violence, as well as to external ra- 
pacity; they withdraw from active utility a large portion of the precious metals, 
which might perhaps be turned to better account elsewhere; and they yield a 
degree of facility of circulation nowise superior to what may be afforded by the 
common process of banking, except perhaps in security, and infinitely more ex- 
pensive to the public and to individuals. They have accordingly been every 
where supplanted by banks of circulation, or by the expedient of an inconvertible 
paper-money. T. 



CHAP. XXII. ON PRODUCTION. 275 

demand, to the discount of bills at very short dates, and is careful 
to have always in hand a considerable amount of specie, probably a 
third, or as much as the half of the total amount of their circulating 
notes; and, even, with all possible caution, it is at times greatly 
embarrassed, whenever a want of confidence in its solvency, or any 
untoward event, causes a sudden run upon the bank for cash. The 
bank of England has been obliged, on an occasion of this kind, to 
scrape together as many sixpences as it possibly could find, to gain 
time by the delay inseparable from payments in such a diminutive 
coin, until a part of the paper in its possession had fallen due. The 
discount bank of Paris, in the year 1788, being then under control 
of government, had recourse to similar paltry expedients. 

The profits of banks of circulation are very considerable; that 
portion of the notes, which is issued on the credit of private com- 
mercial paper, continues running at interest; for the advances have 
been made with the deduction of the discount. But the portion of 
the paper, issued on the credit of the specie in reserve, brings no 
profit; the interest lying dormant in the specie thus withdrawn from 
circulation. 

The banks of England and France make no advances to private 
persons, except on bills of exchange, and give no credit bej'ond the 
funds in hand. They indemnify themselves for the trouble of 
receiving and paying on account of individuals, by turning to 
account the floating balance left in their hands. These two estab- 
lishments have, besides, undertaken the business of paying the 
interest upon the respective national debts, receiving an allowance 
for their trouble: furthermore, they occasionally make advances to 
the governments. 

From these various operations, they derive a great increase of 
their profits. The one last mentioned, however, is completely at 
variance with the purposes of their establishment, as we shall pre- 
sently find. The advances made to the old government of France 
by the then bank of discount, and those of the bank of England to 
the English government, compelled those bodies to a])ply to the 
respective legislatures to give their notes a compulsory circulation; 
thus destroying their fandamental requisite of convertibility. The 
consequence has been, that the former of these banks went all to 
pieces. 

The establishment of several banks, for the issue of convertible 
notes, is more beneficial than the investment of any single body 
with the exclusive privilege; for the competition obliges each of 
them to court the public favour, by a rivalship of accommodation . 
and solidity. 

Banks of circulation issue their notes either in the discount of 
promissory notes or bills of exchange, that is to say, in giving their 
notes payable on demand, and circulating like cash, in exchange for 
private paper, payable at a future date upon which interest is deduct- 
ed; which is the course pursued by the present bank of France, and 
by all the English banks, public and private; or else in lending al 



276 ON PRODUCTION. book i. 

interest to solvent individuals like those of Scotland. Merchants of 
good credit are, in the latter way, supplied with the sums necessary 
for their current expenses and payments, and each of them is thereby 
enabled to embark his whole capital in his commercial enterprises, 
without being obliged to reserve any part to meet the calls upon him 
in the course of business. The merchant of Paris or London must 
contrive matters, so as to have always on hand either in his private 
coffers or in the bank, a sum sufficient to face the demands upon 
him; whereas, the merchant of Edinburgh is relieved from this 
necessity, and at liberty to invest the whole of his funds, in the con- 
fidence that the bank will advance him the money he may happen 
to require.(fl!) 

A bank of circulation affords the advantage of economizing 
capital, by reducing the amount of the sum, kept in reserve for the 
current and contingent expenses of the individuals it accommodates. 

Bank bills or notes, payable on demand, and circulating as cash, 
play so important a part in the progress of national wealth, and 
have engendered such important errors in the brain of many writers 
of repute and information on other topics, that it will be worth while 
to examine their nature and consequences in a very particular 
manner. 

I should premise, that the residue of this section applies ex- 
clusively to bank-notes, depending solely upon the credit of the 
bank for their currency, and convertible at pleasure into cash or 
specie. 

It is a matter no less of curiosity than of importance, to inquire 
whether bank-notes, or paper destitute of intrinsic value, be any 
addition to the stock of national wealth, and what, if any, is the pos- 
sible extent of that addition; for, were there no limits to it, there 
could be no end to the wealth, that a state might acquire in a short 
time by the mere fabrication of some reams of paper. The solution 
of this grand problem may be set down as one of Smith's happiest 
efforts; yet it is not every body that comprehends his reasoning; I 
will try to render it more generally intelligible. 

The wants of a nation require a certain supply of each particular 
commodity, and the extent of that supply is determined by the rela- 
tive prosperity of the nation for the time being. A surplus of each 
of those commodities beyond this demand is either not produced at 
all, or, if produced, must occasion a decline of relative local value: 
it, therefore, naturally finds its way out of the country, and goes in 
quest of a market, where it may be in higher estimation. 

Money is, in this respect, like all other commodities; it is a con- 



(a) The two methods resolve themselves practically into one; for merchants 
of good credit can always procure discountable paper; and the so'.e essential 
difference is, that, in one case, the credit is individual and unevidenced, in the 
other, evidenced, and, in most cases, joint also. The bank of England requires 
the names of more than one firm on the paper it discounts. Country bankers 
often content themselves with the security, or note of hand, of the borrower 
alone. T. 



CHAP. xxrr. ON PRODUCTION. 277 

venient agent, and, therefore, employed as such in all operations of 
exchange; but the intensity of the demand for it is determined in each 
community, by the relative extent and activity of the exchanges 
negotiated within it. As soon as there is a supply of money suffi- 
cient to circulate all the commodities there are to be circulated, no 
more money is imported; or, if a surplus flow in, it emigrates again 
in quest of a market, where its value is greater, or where its utility 
is more desired. It is seldom or never that any body keeps in his 
purse or his coffers more specie than enough to meet the current 
demands of his business or consumption.* Every excess beyond 
these demands is rejected, as bearing neither utility nor interest; 
and the community at large is fully supplied with specie, as soon as 
each individual is possessed of the portion suitable to his condition 
and relative station in societ}'. 

It may be safely left to private interest, to make the best use of 
the excess of specie beyond the demand for circulation. The notion 
that every item of specie, that crosses the frontier, is so much dead 
loss to the community, is just as absurd as the supposition, that a 
manufacturer is so much the poorer, every time he parts with his 
money in the purchase of the ingredient or raw material of his manu- 
facture; or that individuals, the aggregate of whom makes up the 
nation, present foreigners gratuitously with all the money they part 
with. 

Taking it for granted, then, that the specie, remaining in circula- 
tion within the community, is limited by the national demand for 
circulating medium; if any expedient can be devised, for substi- 
tuting bank-notes in place of half the specie or the c(5mmodity, money, 
there will evidently be a superabundance of metal-money, and th^t 
superabundance must be followed by a diminution of its relative 
value. But, as such diminution in one place by no means implies a 
contemporaneous diminution in other places, where the expedient 
of bank-notes is not resorted to, and \vhere, conseq^iently, no such 
superabundance of tlie commodity,' money, exists, money naturally 
resorts thither, and is attracted to the spot where it bears the highest 
relative value, or is exchangeable for the largest quantity of other 
goods: in other words, it flows to the marketsMvhere commodities 
are the cheapest, and is replaced by goods, of value equal to the 
money exported. 

The money that can emigrate in this manner, is that part only oF 
the circulating medium, which has a value elsewhere than within the 
limits of the nation ; that is to say, the specie or metal-money. Since, 
however, specie does not emigrate without an equivalent return; 
and, since its value, which before existed in the shape of specie, and 
was exclusively engaged in facilitating circulation, thenceforth 
assumes the form of a variety of commodities, all items of the repro-. 
ductive national capital, there follows this remarkable consequence:' 
that the national capital is enlarged to the full amount of all the spe- 

* No account is here taken of the money hoarded, which, for the national inte- 
rest, might just as well have remained in the mine. 



278 ON PRODUCTION. book i. 

cie exported upon the introduction of the substitute. Nor is the) 
internal national circulation at all cramped for want of money by' 
this export; for the functions of the specie, that has been withdrawn, 
are just as well performed by the paper substituted in its stead. 

However valuable an acquisition the national capital may thus 
receive, it must not be rated above its real amount. I have supposed, 
for the sake of simplicity, that half the specie might be replaced by 
circulating notes: but this is a monstrous proportion; particularly if 
it be considered, that paper cannot retain its value as money any 
longer than while it is readily and instantly convertible into specie; 
I say, readily and instantly, because otherwise people would prefer 
specie, which is at all times, and without the least hesitation, taken 
for money. To insure this requisite convertibility, it is necessary, 
that, besides having at all times a fund in reserve, in private bills or 
securities, or in specie, sufficient to meet all the notes that may be 
presented, the bank itself should be at all times within the reach of 
the holders of its notes. Therefore, if the territory be of any extent, 
and the notes so generally circulated, as to form half of the circu- 
lating medium, the subordinate offices of the bank must be greatly 
multiplied to place them within reach of all the note holders. 

But, granting the possibility of such an arrangement, and admit- 
ting, that paper might supplant as much as half the requisite national 
currency of specie, let us see what would be the amount of the ac- 
quisition to the national capital. 

No writer of repute has ventured to estimate the requisite circu- 
lating specie of any nation, higher than 1-5 of the annual national 
product; some, indeed, have reckoned it as low as 1-30. Taking 
the highest estimate, viz. 1-5 of the annual product, which, for my 
own part, I consider greatly above the reality in any case; a nation, 
whose annual product should amount to 20 millions, would need but 
4 millions of specie. Therefore, in case the half, or 2 millions, 
were supplanted by circulating paper, and employed in augmenting 
the national productive capital, that capital would be once for all 
augmented, by a value equal to 2-20 or 1-10 of the annual product 
of the nation. 

Again, the annual product of a nation would, probably, be much 
overrated at 1-10 of the gross national productive capital; but let it 
be set down at that rate, allowing 5 per cent interest on productive 
capital, and 5 per cent wages and profits of the industry it sets in 
motion. On this calculation, supposing the paper substitute to add 
to the national capital, in the ratio of 1-10 of its annual product, this 
addition will not at the highest estimate, exceed 1-100 of the pre- 
vious capital. 

Although the practicable issue of bank-notes procures to a nation 
of moderate wealth an accession of capital, much less considerable 
than people may fondly imagine, this accession is, notwithstanding, 
of very great value; for, unless the productive energy of the nation 
be extremely great, as in Great Britain, or the national spirit of 
frugality very general and persevering, as in Holland, the annual 



CHAP. XXII. ON PRODUCTION. 279 

savings withdrawn from unproductive consumption, to be added to 
productive capital, form, even in thriving states, a very inconsidera- 
ble portion of the gross annual revenue. Nations, whose production 
is stationary, as every body knovvs, make no addition to their pro- 
ductive capitals; and the consumption of those on the decline an- 
nually encroaches on t]>eir capitals. 

Should the paper-issues of a bank at any time exceed the demands 
of circulation, and the credit enjoyed by the establishment, there 
follows a perpetual reflux of its notes, and it is put to the expense of 
collecting specie, which is absorbed as fast as collected. The Scotch 
banks, though productive of great benefit, have been obliged, upon 
such trying occasions, to keep agents in London constantly employ- 
ed, in scraping specie together at a charge of two per cent, which 
specie was instantly absorbed. The bank of England, in similar 
circumstances, was under the necessity of buying gold bullion, and 
getting it coined; and this coin was melted again as fast as it was 
paid by the bank, in consequence of the high price of the metal, 
which was itself the effect of the constant purchases made by the 
bank, to meet the calls upon it for specie. In this manner, it sus- 
tained the annual loss of from 2i to 3 per cent, upon a sum of about 
850,000/.,* more than 20 millions of our money. I say nothing of 
the situation of this bank of late 3'ears, since its notes have acquired 
a forced circulation, and, consequently, altered their nature entirely. 

The notes issued by a bank of circulation, even if it have no funds 
of its own, are never issued gratuitously; and, therefore, of course, 
imply the existence, in the coffers of the bank, of a value of like 
amount, either in the shape of specie, or of securities, bearing in- 
terest; upon which latter only the whole real advance of the bank is 
made; and this advance can never be made upon securities that have 
a long time to run: for the securities are the fund, that is to provide 
for the discharge of another class of securities, in the hands of the 
public at large, payable at the shortest of all possible notice, namely, 
on demand. Strictly speaking, a bank can not be at all times in a 
condition to face the calls upon it, and deserve the entire confidence 
of the public, unless the private paper it has discounted, be all, like 
its own notes, payable on demand; but, as it is no easy matter to 
find substantial assets, that shall bear interest, and at the same time 
be redeemable at sight, the next best course is to confine its issues 
to bills of very short dates; and, indeed, well-conducted banks have 
always rigidly adhered to this principle. 

From the preceding considerations may be deduced a conclusion, 
fatal to abundance of systems and projects, viz. that credit-paper can 
supplant, and that but partially, nothing more than that portion of 
the national capital performing the functions of money, which cir- 
culates from hand to hand, as an agent for the facility of transfer; 
consequently, that no bank of circulation, or credit-paper of any de- 
nomination whatever, can supply to agricultural, manufacturing, or 

* Wealth of Nations, book ii. c. 2. 



280 ON PRODUCTION. book i. 

commercial enterprise, any funds for the construction of ships or 
machinery, for the digging of mines or canals, for the bringing of 
waste land into cultivation, or the commencement of long-winded 
speculations; any funds, in short, to be employed as vested capital. 
The indispensable requisite of credit-paper is, its instant converti- 
bility into specie; when the sum total of the paper issued does not 
exist in the coffers of the bank, under the shape of specie, the deficit 
should at least be supplied by securities of very short dates; where- 
as, an establishment, that should lend its funds to be vested in enter- 
prises, whence they could not be withdrawn at pleasure, could never 
be prepared with such securities. An example will illustrate this 
position. Suppose a bank of circulation to lend 6,000 dollars of 
its notes, circulating as cash, to a landholder on mortgage of his 
land, presenting the amplest security. This loan is destined by the 
landholder to the construction of necessary buildings, for the culti- 
vation of the estate; for which purpose he contracts with a builder, 
and pays him the 6,000 dollars of notes advanced by the bank. 
Now, if the builder, after a short lapse of time, be desirous of turn- 
ing the notes into specie, the bank cannot pay him by a transfer of 
the mortgage. The only property the bank has to meet the 6,000 
dollars of notes is a security, ample beyond doubt, but not available 
at the moment. 

The securities in the hands of a bank, I hold to be a solid basis 
for the whole of its issues of notes, provided those securities be of 
solvent persons, and have not too long to run; for the securities will 
be redeemed either with specie, or with the notes of the bank itself. 
In the first case, the bank is supplied with the means of paying its 
notes; in the second, it is saved the trouble of providing for them. 

If, by any circumstance, the notes be deprived of their power of 
circulating as specie, the task of replacing the metal for the paper- 
money does not devolve upon the bank; nor was it at the first sad- 
dled with the business of turning to account the metal money its 
notes rendered superfluous. For, as we have already observed, the 
bank can extinguish the whole of ils paper with the private securi- 
ties it holds. The inconvenience falls upon the public, which is 
under the necessity of finding a new agent of circulation, either by 
a re-import of the metal-money, or by the substitution of private 
paper; but probably the public would, in such circumstances, apply 
again to a bank conducted on sound principles.* 

* Since the first publication of this passage, this very circunastance has hap' 
pened in respect to the bank of Paris, in 1814 and 1815, when that capital was 
besieged and occupied by the allied armies. The advances of the bank to the 
government, and to individuals, which could not be recalled immediately, did 
not exceed the capital of the establishment, for which the shareholders can not 
be called upon; and its paper-issues, payable to bearer, were all covered, either 
by specie in hand, or by commercial paper of short dates. By this means, not- 
withstanding the very critical circumstances of the moment, the merchants con- 
tinued to employ its notes; which they could not well do without; and they 
were paid as usual in cash without interruption, during the whole of the hostile 
occupation: which shows at once the utility of a bank of circulation, and the 
advantage of leaving inviolate the convertibility of paper-issues. 



CHAP. XXII. ON PRODUCTION. 281 

This will serve to explain, why so many schemes of agricultural 
banks for the issue of circulating and convertible notes on ample 
landed security, and so many other schemes of a similar nature, have 
fallen to the ground in very little time, with more or less loss to the 
shareholders and the public* Specie is equivalent to paper of per- 
fect solidity, and payable at the moment; consequently it can only 
be supplanted by notes of unquestionable credit, and payable on de- 
mand; and such notes cannot be discharged by a bare security, even 
of the best possible kind. 

For the same reason, bills of exchange in the nature of accommo- 
dation-paper, as it is called, can never be a sound basis for an issue 
of convertible paper. Such bills of exchange are paid when due by 
fresh bills, that have a further term to run, and are negotiated with 
the deduction of discount. When the latter fall due, they are met 
by a third set payable at a still later date, which are discounted in 
like manner. If the bank discounts such bills, the operation is no 
more than an expedient for borrowing of the bank in perpetuity; 
the first loan being paid with a second, the second witU the third, 
and so on. And the bank experiences the evil of issuing more of 
its notes, than the circulation will naturally absorb, and the credit of 
the establishment will support; for the notes, borrowed upon such 
bills, do not help to circulate and diffuse real value, because they 
represent and contain no real value themselves; consequently, they 
continually recur to be exchanged for specie. It is on this account, 
that the discount-bank of Paris, while it continued to be well ad- 
ministered, did, as the present banks of France and England do still 
refuse, as far as it is able, to discount accommodation paper. 

The consequences are similar and equally mischievous, when a 
bank makes advances to government in perpetuity, or even for a 
very long period, (a) This was the cause of the failure of the bank 
of England. Not being able to obtain payment from government, 
it was unable to withdraw the notes in which the loan was made. 
From that moment its notes ceased to be convertible; and until the 
resumption of cash payments in 1822, enjoyed a forced circulation. 
The government, being itself unable to supply the bank with the 
means of payment, discharged that body from its liability to its own 
creditors.! 

* In 1803, the land-bank of Paris was, for this reason, obliged to suspend the 
payment of its notes in cash; and to give notice, that they would be paid off by 
instalments out of the proceeds of its real securities. 

f Thornton, in his tract ou the Paper Credit of Great Britain, written expressly 

(a) That is to say, advances its notes. A bank, like an individual, may ad- 
vance its capital, which then becomes more or less vested and fixed. The whole 
capital of the bank of England has been thus advanced; and there would have 
been no danger, had it not advanced its notes also. When the advances of paper 
are made upon transferable securities, stock, exchequer bills, and the like, those 
securities may be sold for cash, or for the notes of the bank itself, so long as 
they retain their value, and thus the safety and solvency of the bank maintained. 
But this operation is unnecessarily complex; for the government might itself 
have sold, and thus have saved the brokerage or profit accruing upon the opera- 
tion to the bank. T. 
36 



282 ON PRODUCTION. book i. 

The holders of the notes of a bank issuing convertible paper run 
little or no risk, so long as the bank is well administered, and inde- 
pendent of the government. Supposing a total failure of confidence 
to bring all its notes upon it at once for payment, the worst that can 
happen to the holders is, to be paid in good bills of exchange at 
short dates, with the benefit of discount; that is to say, to be paid 
with the same bills of exchange, whereon the bank has issued its 
notes. If the bank have a capital of its own, there is so much addi- 
tional security; but, under a government subject to no control, or to 
nominal control only, neither the capital of the bank, nor the assets 
in its hands, offer any solid security whatever. The will of an arbi- 
trary prince is all the holders have to depend upon; and every act 
of credit is an act of imprudence. 

As far as I am capable of judging, such is the efiect of banks of 
circulation and of their paper issues upon individual and national 
wealth. This effect is described by Smith in a quaint and ingenious 
metaphor. The capital of a nation he likens to an extensive tract 
of country, whereupon the cultivated districts represent the produc- 
tive capital, and the high roads the agent of circulation, that is to 
say, the money, that serves as the medium to distribute the produce 
among the several branches of society. He then supposes a machine 
to be invented, for transporting the produce of the land through the 
air; that machine would be the exact parallel of credit-paper. 
Thenceforward the high roads might be devoted to cultivation. 
* The commerce and industry of the country, however,' he conti- 
nues, ' though they may be somewhat augmented, cannot be alto- 
gether so secure, when they are thus, as it were, suspended upon the 
Daedalian wings of paper-money, as when they travel about upon the 

with a view to justify the suspension of cash-payments by that establishment, 
has attacked the positions of Smith upon this subject. He tells us, that the 
extraordinary run upon the bank, which brought about the suspension, was oc- 
casioned, not by the excess of its issues, but, on the contrary, by their partial 
contraction. " An excessive limitation of bank-notes," he observes, " will pro- 
duce failures, failures must cause consternation, and consternation must lead to 
a run upon the bank for guineas." By this reference to an extreme case, he en- 
deavours to support his paradoxical opinions. When a convertible paper has 
succeeded in driving out of the country too large a portion of the metallic money, 
and the confidence in the paper happens suddenly to decline, great confusion and 
embarrassment will doubtless ensue, because the remaining agent of circulation 
is insufficient to effect the business; but it is a great mistake to suppose, that 
the deficiency can be remedied by the multiplication of a paper, not enjoying the 
confidence of the public. If the bank of England was able to survive the shock, 
it was because of the indispensable necessity of some agent of transfer, of some 
money or other, of paper in default of all others, in so commercial a country; be- 
cause the government and the bankers of London, who were interested in the 
safety of the bank, unanimously agreed not to call upon it for cash, until it should 
be in a condition to pay; that is to say, until the government should have paid 
its advances in actual value. The bank had lent to the government more than 
its whole capital; for to that extent it might have gone with safety, its capital 
not being wanted for the discharge or convertibility of its paper; had it not so 
done, the short bills in its possession would have been sufficient for the extinc- 
tion of its convertible paper. 



CHAP. XXII. ON PRODUCTION. 283 

solid ground of gold and silver. Over and above the accidents, to 
which they are exposed from the unskilfulness of the conductors of 
this paper-money, they are liable to several others, from which no 
prudence or skill of those conductors can guard them. An unsuc- 
cessful war, for example, in which the enemy got possession of the 
capital, and consequently of that treasure, which supported the credit 
of the paper-money, would occasion a much greater confusion in a 
country, where the whole circulation was carried on by paper, than 
in one, where the greater part of it was carried on by gold and silver. 
The usual instrument of commerce having lost its value, no 
exchanges could be made except by barter or upon credit. All 
taxes having usually been paid in paper-money, the prince would 
not have wherewithal either to pay his troops, or to furnish his 
magazines; and the state of the country would be much more irre- 
trievable, than if the greater part of its circulation had consisted in 
gold and silver. A prince, anxious to maintain his dominions at all 
times in the state, in which he can most easily defend them, ought 
upon this account to guard, not only against that excessive multipli- 
cation of paper-money, which ruins the very banks which issue it, 
but even against that multiplication of it, which enables them to fill 
the greater part of the circulation of the country with it* 

Forgery alone is enough to derange the affairs of the best con- 
ducted and most solid bank. And forgery of notes is more to be 
apprehended, than counterfeits of specie. The stimulus of gain is 
greater. For there is more profit to be made by converting a sheet 
of paper into money, than by giving the appearance of precious 
metal to another metal, that has some though very little, intrinsic 
value, especially if it be compounded or covered with a small por- 
tion of the counterfeited metal; and perhaps, too, the materials for 
the former operation are less liable to discovery. Besides, the coun- 
terfeits of -specie can never reduce the value of the specie itself, 
because the latter has an intrinsic and independent value as a com- 
modity; whereas, the mere belief that there are forged notes abroad, 
so well executed, as to be scarcely distinguishable from the genuine, 
is enough to bring both forged and genuine into discredit. For 
which reason, banks have sometimes preferred the loss of paying 
notes they know to be forged, to the hazard of bringing the genuine 
ones into discredit, by the exposure of the fraud. 

One method of checking the immoderate use of notes is, to limit 
them to a fixed and high denomination of value; so as to make them 
adapted to the circulation of goods from one merchant to another, 
but inconvenient for the circulation between the merchant and the 
consumer. It has been questioned whether a government has any 
right to prohibit the issue of small notes, while the public is willing 
to take them; and whether such limitation be not a violation of that 
liberty of commerce, which it is the chief duty of a government to 
protect. But the right undoubtedly is just as complete, as that of 

* Wealth of Nations, book ii. chap. 3. 



284 ON PRODUCTION. book 

ordering a building to be pulled down, because it endangers the 
public safety. 



Section IV. 
Of Paper-Money. 

The distinctive appellation of paper-money, I have reserved 
exclusively for those obligations, to which the ruling power may 
give a compulsory circulation in payment for all purchases, and 
discharge all debts and contracts, stipulating a delivery of money. 
I call them obligations, because, though the authority that issues, 
is not bound to redeem them, at least not immediately, yet they 
commonly express a promise of redemption at sight, which is abso- 
lutely nugatory; or of redemption at a date expressed, for which 
there is no sort of security; or of territorial indemnity, the value of 
which we shall presently inquire into. 

Such obligations, whether subscribed by the government or by 
individuals, can be converted into paper-money by the public au- 
thority only, which alone can authorise the owners of money to pay 
in paper. The act is, indeed, an exertion, not of legitimate, but of 
arbitrary authority; being a deterioration of the national money in 
the extreme degree. 

Upon the principles above established, it should seem, that a mo- 
ney destitute of all value as a commodity, ought to pass for none in 
all free dealing subsequent to its issue; and this is always the case 
in practice sooner or later. The notes of what was improperly 
called Law's Bank, and the assignats issued during the French 
revolution, were never regularly called in or cancelled; yet those of 
the highest denomination would not pass at present for a single sol. 
How then, came they ever to pass for more than their real value? 
Because there are many expedients of fraud and violence, which 
will always have a temporary eificacy. 

In the first place, a paper, wherewith debts can be legally, though 
fraudulently, discharged, derives a kind of value from that single 
circumstance. Moreover, the paper-money may be made efficient 
to discharge the perpetually recurring claims of public taxation. 
Sometimes a tariff or maximum of price is established; which, in- 
deed, soon extinguishes the production of the commodities affected 
by it, but gives to the paper-money a portion of the value of those 
actually in existence. Besides, the very creation of a paper-money 
with forced circulation occasions the disappearance of metallic mo- 
ney; for, as it is made to psss at par with paper, it naturally seeks a 
market, where it can find its true level of value. The paper-money 
is thus left in the exclusive possession of the business of circulation; 
and the absolute necessity of some agent of transfer, in every civil- 
ized community, will then operate to maintain its value.* So urgent 

* Wherever a paper-money has been established, the difference between its 



CHAP. xxir. ON PRODUCTION. 285 

is this necessity, that the paper-money of England, consisting of the 
notes of the bank, has been kept at par with specie, simply by the 
limitation of the issues to the demands of circulation. 

Nations precipitated into foreign wars, before they have had time 
previously to accumulate the requisite capital for carrying them on, 
and destitute of sufficient credit to borrow of their neighbours, have 
almost always had recourse to paper-money, or some similar expe- 
dient. The Dutch, in their struggle with the Spanish crown for in- 
dependence, issued money of paper, of leather, and of many other 
materials. The United States of America, under similar circum- 
stances, likewise had recourse to paper-money; and the expedient 
that enabled the French republic to foil the formidable attack of the 
first coalition, has immortalized the name oi assignats. 

Law has been unjustly charged with the whole blame of the 
calamities resulting from the scheme that bears his name. That he 
entertained just ideas respecting money, may be gathered from the 
perusal of a tract* he published in his native country, Scotland, to 
induce the Scotch government to establish a bank of circulation. 
The bank established in France, in 1716, was founded on the princi- 
ples there set forth. Its notes were expressed in these words: 

" The bank promises to pay the bearer at sight ****** 
livres in money of the same weight and standard as the money of 
this day. Value received at Paris," &c. 

— The bank, which was then but a private association, paid its notes 
regularly on demand: they were not yet metamorphosed into paper- 
money. Matters remained on this footing, and went on very well, 
till th^ year 171 9 ;t at which period the king, or rather the regent, 
repaid the shareholders, and took the management into his own 
hands, calling it the Royal Bank. The notes were then altered to 
this form: 

vahie in the home market, where it has utility, and its value in foreijjn markets, 
where it has no utility, has afforded a fruitful field for speculation, that has en- 
riched many adventurers. In 1811, 100 guineas in gold would purchase at 
Paris a bill of exchange on London, for 140/. sterling, payable in the paper which 
was the only currency of England. Yet the difference between gold and paper 
in the London market at the same period, was only 15 per cent. It was in this 
way, that the paper was of higher value in England than abroad. Accordingly, 
I find from returns with which I have been favoured, that gold in guineas or 
bullion was smuggled into the ports of Dunkirk and Gravelines alone, in the 
years 1810, 11, 12, and 13, to the amount of 33,875,090 dollars. There was a 
similar speculation in other commodities at large; but it was attended with more 
risk and difficulty; the import into France being very hazardous, although the 
export from England was encouraged in every possible way. Yet this traffic 
would soon have found its level, for it must have produced bills on England in 
such quantity, as to have brought the exchange to par at least, had not the conti- 
nental subsidies of England furnished a continual supply of bills on London 
without any return. 

♦ This work was translated into French while Law continued in the office of 
Controller-General of France; and is entitled Considerations on Commerce and 
Money. 

t Vide Dutot. torn. ii. p. 200, for a detail of the beneficial effects of the insti- 
tution, as originally conducted. 



2S6 ON PRODUCTIOk book i. 

"The bank promises to pay the bearer at sight ****** 
livres in silver coin. Value received at Paris," &c. 
— This alteration, slight as it was in appearance was a radical one in 
substance. The first note stipulated to pay a fixed quantity of sil- 
ver, viz. the quaatity contained in the livres current at the date of 
issuing the notes. The second merely engaged to pay livres, and 
so opened a door for whatever alterations an arbitrary power might 
think proper to make in the real value expressed by the word livre. 
And this was called fixing the rate of the paper-money; whereas, on 
the contrary, it was unfixing, and making it a fluctuating value; and 
the fluctuations were truly deplorable. Law strenuously opposed 
the innovation; but principle was compelled to give w^ay to power; 
and the crimes of power, w^hen the consequences began to be felt, 
were confidently attributed to the fallacy of the principle. 

The assignats issued by the revolutionary government were 
worth even less than the paper-money of the regency. The latter 
gave a promise, at least, of paying in silver: and, though the payment 
might be greatly curtailed by a deterioration of the silver-coin, yet 
sooner or later the paper might have been redeemed, if the govern- 
ment had but been more moderate in its issues, and more scrupulous 
in fulfilling its engagements. But the assignats conveyed no right 
to call for silver; nothing but a right to purchase or obtain the na- 
tional domains. Let us see what this right was really worth. 

The original assignats purported to be payable at sight, at the 
Caisse de P Extraordinaire, where they were, in fact, never paid at 
all. It i^ true, they were received in payment for the national 
domains bought by individuals at a competion-price; but the value 
of these domains could never give any determinate value to the 
assignats, because their nominal value increased exactly in propor- 
tion as that of the assignats declined. The government was not 
sorry to find the price of national domains advance, because it was 
thereby enabled to withdraw a greater amount of assignats, and 
consequently, to re-issue new ones, without enlarging the quantity 
afloat. It was not aware, that, instead of the national domains 
advancing in price, the assigjiats were undergoing a rapid deprecia- 
tion, and that the further that depreciation was pushed, the more 
assignats must be issued in payment of an equal quantity of 
supplies. 

The last assignats no longer purported to be payable at sight. 
The alteration was little attended to, because neither first nor last 
were, in fact, ever paid at all. But their vicious origin was made 
more apparent. The paper contained these words: 

"National domains — Assignat of one hundred francsj'^ &c. 
Now, what was the meaning of the term one hundred /r«72C5J? What 
value did they convey the notion of? Was it the value of the quan- 
tity of silver, heretofore known under the designation of one hundred 
francs? No; for 100 fr. could not possibly be obtained with an 
assignat to that amount. Did it convey the idea of as much land, 
as might be purchased for lOO/r. in silver? Certainly not: for that 



CHAP. XXII. ON PRODUCTION. 287 

quantity of land could no more be obtained, even from the govern- 
ment, by an assignat of 100/;'. than \QOfr. in specie. The domains 
were disposed of at public a-uction for as many assignats as they 
would fetch; and the value of this paper had latterly so far declined, 
that one of lOOyV. would not buy an inch square of land. 

In short, setting aside all consideration of the discredit attached to 
that government, the sum expressed in an assignat presented the 
idea of no definite value whatever; and those securities could not but 
have fallen to nothing, even had the government inspired all the con- 
fidence, of which it was so eminently destitute. The error was dis- 
covered in the end, when it was impossible any longer to purchase 
the most trifling article with any sum of assignats, whatever might 
be its amount. The next measure was to issue mandats, that is to 
say, papers purporting to bean order for the absolute transfer of the 
specific portion of the national domains expressed in the mandat: 
but, besides that, it was then too late, the operation was infamously 
executed. 



BOOK II. 

OF THE DISTRIBUTION OF WEALTH. 



CHAPTER I. 

OF THE BASIS OF VALUE; AND OF SUPPLY AND DEMAND, 

The principal phenomena of production have been investigated 
in the first book; wherein I have shown how human industry, with 
the aid of capital and of natural agents and properties, creates every 
kind of utility, which is the primary source of value; and in what 
way social institutions and public authority operate to the benefit or 
the prejudice of production. This second book will be devoted to 
the consideration of the distribution of wealth: to which end it will 
be necessary, first, to analyze the nature of value, the object of dis- 
tribution; secondly, to ascertain the laws, which regulate the dis- 
tribution of value, when once created amongst the various members 
of society, so as to constitute individual revenue. 

The valuation of an object is nothing more or less than the affirma- 
tion, that it is in a certain degree of comparative estimation with some 
other specified object; and any other object possessed of value may 
serve as the point of comparison. A house, for instance, may be 
valued in corn or in money. To say that it is worth 4000 dollars 
conveys a more accurate notion of its value, than to say that it is 
worth 4000 bushels of wheat, solely because the habit of reckoning 
the value of all commodities in coin makes it easier for the mind to 
form an idea of the value of 4000 dollars in other commodities, that 
is to say, of the quantity of other commodities obtainable for that 
sum, than of that obtainable for 4000 bushels of wheat. Yet, if 
wheat be 1 dollar a bushel, the degree of value expressed by each is 
the same. 

In every act of valuation, the object valued is the fixed datum. 
In the instance first given, the house is the datum: it is a definite 
amount of materials, put together in a definite manner, upon a defi- 
nite site. But the point of comparison is variable in amount, ac- 
cording to the degree of estimation in the mind of the valuer. If 
valued at 4000 dollars the house is reckoned to be equivalent to so 
many pieces of silver coin of the weight of 416 grains, with. a mix- 



CHAP. I. ON DISTRIBUTION. 289 

ture of 179-1664 parts of alloy; if at 4,500 dollars, or 3,500 dollars, 
it is but a variation of the quantity of the commodity, that is the 
specific point of comparison. So likewise, if that point be wheat, the 
variablequantity of that commodity would express the degree of value. 

Valuation is vague and arbitrary, when there is no assurance that 
it will be generally acquiesced in by others. The owner of the 
house may reckon it worth 4,500 dollars, while an indiii'erent per- 
son would value it at no more than 3,500 dollars, and probably nei- 
ther would be right. But if another, or a dozen other persons be 
willing to give for it a specific amount of other commodities, say 
4000 dollars, or 4000 bushels of wheat, we may conclude the esti- 
mal£ to be a correct one. A house that will fetch 4000 dollars in 
the market is worth that sum.* But if one bidder only will give 
that price, and he is unable to re-sell it without loss, he will give 
more than it is worth. The only fair criterion of the value of an 
object is, the quantity of other commodities at large, that can be 
readily obtained for it in exchange, whenever the owner wishes to 
part with it; and this, in all commercial dealings, and in all money 
valuations, is called the current price.\ 

What is it, then, that determines this current price of commodities? 

The want or desire of any particular object depends upon the 
physical and moral constitution of man, the climate he may live in, 
the laws, customs, and manners of the particular society, in which 
he may happen to be enrolled. He has wants, both corporeal and 
intellectual, social and individual; wants for himself and for his 
family. His bear-skin and reindeer are articles of the first necessity 
to the Laplander; whilst their very name is unknown to the lazza- 
rone of Naples, who cares for nothing in the world if he get but his 
meal of macaroni. In Europe, courts of justice are considered in- 
dispensable to the maintenance of social union; whereas the Indian 
of America, the Tartar, and the Arab, feel no want of such establish- 
ments. It is not our business here to inquire, wherein these wants 
originate; we must take them as existing data, and reason upon 
them accordingly. 

* My brother, Louis Say, of Nantes, has attacked this position in a short tract 
entitled, Principales Causes de la Richesse el de la Misire des Peuples et des Parli- 
culicrs, 8vo. Paris. Detervillc. He lays down the maxim, that objects are items 
of wealth, solely in respect of their actual utility, and not of their admitted or re- 
cognised utility. In the eye of reason, his position is certainly correct; but, in 
this science relative value is the only guide. Unless the degree of utility be 
measured by th§ scale of comparison, it is left quite indefinite and vague, and, 
even at the same time and place, at the mercy of individual caprice. The posi- 
tive nature of value was to be established, before political economy could pre- 
tend to the character of a science, whose province it is to investigate its origin, 
and the consequences of its existence. 

I In the earlier editions of this work, I had described the measure of value 
to be the value of the other product, that was the point of comparison, which 
was incorrect. The quantity and not the value of that other product, is the mea- 
sure of value in the object of valuation. This mistake gave rise to much ambi- 
guity of demonstration, which the severity of criticism, hoth fair and unfair, has 
taught me to correct. Fas est et ab hoste doceri. 
37 



290 ON DISTRIBUTION. book ii. 

Of these wants, some are satisfied by the gratuitous agency of 
natural objects; as of air, water, or solar light. These may be deno- 
minated natural wealth, because they are the spontaneous offering 
of nature; and, as such, mankind is not called upon to earn themby 
any sacrifice or exertion whatever; for which reason, they are never 
possessed of exchangeable value. Other wants there are, that can 
only be satisfied by the employment of objects possessed of an 
utility, which they could not have been invested with without some 
modification by human agency, — -without having undergone some 
change of condition, and without some difficulty having been sur- 
mounted for the purpose. Of this kind are the products of agricul- 
ture, commerce, and manufacture, in all their infinite ramifications. 
To them alone is any value attached; and for a very obvious reason; 
because the very act of production implies an act of mutual exchange, 
in which the producer has given his personal agency for the product 
obtained by its exertion. Wherefore, he will hardly resign it with- 
out receiving what is, in his estimation, an equivalent. These may 
be called social wealth, both because an act of exchange is in itself 
a social act, and because exclusive property in the product obtained 
by personal exertion, or by an act of exchange, can only be secured 
by social institutions. Social wealth, it is to be observed, is the only 
part of human wealth, that can form the subject of scientific research. 
1. Because it is the only part that is the object of human estimation, 
or at least of such estimation, as is not altogether arbitrary and men- 
tal. 2. Because it is the only one which is created, distributed, and 
destroyed, according to any rules that can be assigned by human 
science. 

The knowledge of the ground-work of the quality, value, or 
rather exchangeable value, leads to the perception of its origin. 
The items of social vi^ealth are invested with value by the necessity 
of giving something to obtain them; and that something is produc- 
tive exertion. When once obtained, when this sacrifice has been 
made in the attainment, the party is really more wealthy; he has 
wherewithal to satisfy more wants; and, if the object obtained by 
this sacrifice be unsuited to the personal wants of the owner, he may 
make use of it for the attainment of some object of personal desire, 
by the way of exchange for some other product; which other pro- 
duct will itself be the result of similar productive exertion; so that, 
in fact, the exchange will be a mere mutual transfer of the productive 
exertion on either side, whereof the two products respectively are 
the result. When a bushel of wheat is given for seven pounds of 
coffee, there is a mere transfer of the productive agency exerted in 
creating the one, for that exerted in the creation of the other.* 

* It is scarcely necessary to mention, that when commodities are exchanged, 
not for one another, but for money, the case is nowise varied. No seller ever 
takes money for his own consumption, or for any other purpose, than as an object 
of a second exchange; so that, in reality, the product sold is exchanged for the 
product bought with the price. When a bushel of wheat has been sold for a 
dollar, and 7 lbs. of coffee bought with that dollar, the wheat has actually been . 



CHAP. I. ON DISTRIBUTION. 291 

Wherefore, there is a current value or price established for pro- 
ductive service as well as for products. For, if the agency exerted 
in the creation of a bushel of wheat can obtain, as its reward, in the 
way of exchange, either a bushel of wheat or seven pounds of coflfee 
indifferently, what is there to prevent its obtaining in the same way 
any other equivalent product, say a yard of cotton cloth, 5 yards of 
ribbon, a dozen plates, or any thing else? Should the bushel of 
wheat be exchangeable for a less amount of any of these commodi- 
ties respectively, the productive agency exerted in the creation of 
wheat would be proportionately less rewarded, than that exerted in 
the creation of the specific commodity; and a portion of the former 
would be attracted to the latter branch of production, until the 
recompense of labour in each department should find its fair level. 

Each class of productive agency has a current price peculiar to 
itself. If the productive agency exerted in the production of a 
bushel of wheat can obtain for itself but 1-15 of its own product, it 
will be entitled to no more than 1-15 of the value of any other pro- 
duct obtainable by exchange for that quantity of wheat; for instance 
to 1-15 of a dollar, and so of other products. 

Thus it is obvious, that the current value of productive exertion 
is founded upon the value of an infinity of products compared one 
with another;* that the value of products is not founded upon that of 
productive agency, as some authors have erroneously affirmed ;t and 
that since the desire of an object, and consequently its value origi- 
nates in its utility, it is the ability to create the utility wherein ori- 
ginates that desire, that gives value to productive agency; v/hich 
value is proportionate to the importance of its co-operation in the 
business of production, and forms, in respect to eacli product indivi- 
dually, what is called, the cost of its production. 

The utility of a product is not confined to one human being, but 
applies to a whole class of society at the least, as in the case of parti- 
cular articles of clothing; or to a whole community, as in that of 
most of the articles of food that are adapted to human consumption 
in general, without distinction of sex or age. For this reason, the 
demand for a specific object, or product, or act of productive exer- 
tion, has a certain degree of extent. . The aggregate demand for sugar 
in France is said to exceed 500,000 quintals per annum. Even the 
individual demand of a specific product for individual consumption 
may be more or less urgent. Whatever be its intensity, it may be 

bartered for the coffee, and the money that has intervened has withdrawn itself 
as completely, as if it had never appeared at all in the transaction. Wherefore 
it is quite correct to say, that relative value is determined by the relation of com- 
modities one to another, and not solely by that of each commodity to money. 

* It must not be inferred from this passage, that 1 mean to say, that the pro- 
ductive agency exerted in raising a product, whose charges of production have 
amounted to a dollar, although it is saleable for 75 cents only, is therefore worth 
but 75 cents. My position merely implies, that this amount of productive ser- 
vice has, in such case, raised a value of 75 cents only, though it might have 
raised a value of a dollar. 

f Ricardo, Prin .^ol. Econ. and Taxation. 



292 ON DISTRIBUTION. book ir. 

called by the general name of demand; and the quantity attainable 
at a given time, and ready for the satisfaction of those who are in 
want of the specific article, may be called the supply or amount in 
c'lrculation. 

But this must be understood with some limitation; for there is no 
object of pleasure or utility, whereof the mere desire may not be 
unlimited, since every body is always ready to receive whatever can 
contribute to his benefit or gratification. There must, therefore, be 
some bounds to demand; and the most effectual limitation is, the 
ability to give some other equivalent product for the object of desire. 
All the porters in a commercial city might desire to have a coach 
and six for the more comfortable execution of their business, without 
raising the price of horses and carriages a tittle. The objects, which 
each individual has to give as an equivalent for the object of his 
desire, are no other than the products of his own productive means, 
which are limited even in the case of the most wealthy member of 
society. 

"Wealth is, in all countries, distributed in every degree of grada- 
tion, from the populous level of mediocrity to the solitary pinnacle 
of extreme affluence. Accordingly, the products most generally 
desirable are really demanded by a limited number only, because 
they alone have wherewithal to obtain them; and even their ability 
may be more or less according to circumstances. Whence it may 
be further concluded, that the same product or products may be in 
greater demand at a lower scale of price, and when attainable by less 
productive exertion, although nowise increased in utility, merely 
because accessible to a greater number of consumers; and, on the 
contrary, less in demand at a higher scale of price, because accessible 
to a smaller number. 

Suppose that, in a severe winter, a method should be hit upon of 
manufacturing knit-waistcoats of woollen at2 dollars apiece; probably 
all who should have 2 dollars left, after satisfying more urgent wants, 
would provide themselves with these waistcoats; but those who 
should have but a dollar and a half left must still go without. If the 
same article could be produced at one dollar and a half, these latter 
also might all be provided and beeome consumers; and the consump- 
tion would be still further extended, if they should be produced at 
one dollar only. In this manner, products formerly within reach of 
the rich alone have been made accessible to almost every class of 
society, as. in the case of stockings. 

When a product is raised in price, whether by taxation or other- 
wise howsoever, the contrary effect is experienced; the number of 
its consumers is reduced; for it can only be obtained by such, as can 
afford to pay for it; and the ability to purchase is not increased by 
the same causes, that operate to raise the price. Thus, in England, 
the great majority of the population is wholly precluded from the 
consumption of vinous liquors, and of many other articles; for their 
attainment involves so large a sacrifice of products, or of productive 
agency, that those only can attempt it, who have a great deal of 



CHAP. I. ON PRODUCTION. 293 

either to spare. In such cases, not only is the number of consumers 
dimuiished, but the consumption of each consumer is reduced also. 
Though a consumer of coffee may not be compelled, by a rise of its 
price, to relinquish that beverage altogether, he must at all events 
curtail the amount of his consumption; which is then like that of 
two individuals, of whom one discontinues, and the other remains 
able and willing to continue the use of the article. 

In commercial speculation, as the purchaser does not buy for his 
own consumption, he proportions his purchases to what he expects 
to sell. Since, then, the quantity he can sell depends upon the 
price he can afford to sell at, he will buy less according as the price 
rises, and more according as it falls. 

In poor countries, objects of even the commonest use, and of infe- 
rior price, frequently exceed the means of a great proportion of the 
population. There are countries, where shoes, though cheap, are 
out of reach of most of the inhabitants. The price of this commo- 
dity does not fall to a level with the means of the people; because 
that level is still below the bare cost of production. But, shoes of 
leather not being absolutely necessary to existence, those who are 
unable to procure these, wear wooden shoes, [sabots) or go barefoot. 
When this is unhappily the case with an article of primary neces- 
sity, part of the population must perish, or at least cease to be 
renewed. These are the causes of a general nature, that limit the 
demand for each product, and for all products in general. 

In respect to supply, it consists of the whole of any commodity 
which the owners for the time being are disposed to part with for 
an equivalent, in other words, to sell at the current rate, and not 
merely of what is actually on sale at the time. The whole of this is 
also called the circulating or floating stock. Yet, strictly speaking, 
no commodity is in circulation, except during the act of transit from 
the seller to the purchaser, which is almost instantaneous. But the 
bare act of transit has no influence on the terms of the bargain, to 
which it is commonly subsequent; it is a mere matter of executive 
detail. The point of real importance is, the inclination of the 
owner to part with the object of property. A commodity is in cir- 
culation, whenever it is in quest of a purchaser, which it may be in 
the most urgent need of, without altering its locality in the least. 
Thus, the stock in a shop or warehouse is in circulation; thus too, 
lands, rent-charges, houses, and the like, are said to be in circulation; 
and the expression is intelligible enough. Even industry is some- 
times in circulation and sometimes not, according as it is either in 
quest of employment, or already employed. 

For the same reason, an object ceases to be in circulation, the 
moment it is set apart, cither for consumption or for export to an- 
other market, or accidentally destroyed, or withdrawn by the ca- 
price of its owner, or held back at a price, which amounts to a 
refusal to sell. 

Inasmuch as supply consists of those commodities only, which 
are to be had at the current price oi- ordinary rate of the market, a 



294 ON DISTRIBUTION. book ii. 

commodity raised by the cost of production above that level, will 
cease to be produced, or to form part of the supply. Wherefore, 
the supply will be more abundant, when the current price is high, 
and more scanty when that price has declined. 

Besides these universal and permanent limitations of supply and 
demand, there are others of a casual and transient nature, which 
always operate concurrently with the former. 

The prospect of an abundant vintage will lower the price of all 
the wine on hand, even before a single pipe of the expected vintage 
has been brought to market; for the supply is brisker, and the sale 
duller, in consequence of the anticipation. The dealers are anxious 
to dispose of their stock in hand, in fear of the competition of the 
new vintage; while the consumers, on the other hand, retard their 
fresh purchases, in the expectation of gaining in price by the delay. 
A large arrival and immediate sale of foreign articles all at once, 
lowers their price, by the relative excess of supply above demand. 
On the contrary, the expectation of a bad vintage, or the loss of 
many cargoes on the voyage, will raise prices above the cost of 
production. 

Moreover, there are some particular products, which nature or 
human institutions have subjected to monopoly, and thus prevented 
from being supplied in equal abundance with those of a similar de- 
scription. Of this kind are the wines of particular and celebrated 
vineyards, the soil of which cannot be extended by the extended 
demand. So the postage of letters is, in most countries, charged at 
a monopoly-price. 

Finally, whatever be the general or particular causes, that operate 
to determine the relative intensity of supply and demand, it is that 
intensity, which is the ground-work of price on every act of ex- 
change; for price, it will be remembered, is merely the current 
value estimated in money. The demand for all objects of pleasure, 
or utility, would be unlimited, did not the difficulty of attainment, 
or price, limit and circumscribe the supply. On the other hand, 
the supply would be infinite, were it not restricted by the same cir- 
cumstance, the price, or difficulty of attainment: for there can be no 
doubt, that whatever is producible would then be produced in un- 
limited quantity, so long as it could find jjurchasers at an}'^ price at 
all. Demand and supply are the opposite extremes of the beam, 
whence depend the scales of dearness and cheapness; the price is 
the point of equilibrium, where the momentum of the one ceases, 
and that of the other begins. 

This is the meaning of the assertion, that, at a given time and 
place, the price of a commodity rises in proportion to the increase 
of the demand and the decrease of the supply, and vice versa; or in 
other words, that the rise of price is in direct ratio to the demand, 
and inverse ratio to the supply. 

The utility of an object, or, what is the same thing, the desire to 
obtain it, may possibly be unable to raise its price to a level with its 
cost of production. In this case it is not produced, because its pro- 



CHAP. I. ON DISTRIBUTION. 295 

duction would cost more than the product would be worth. Pro- 
bably the price that caviar* would fetch at Paris would hardly 
equal the charge of producing it there; for it is so little in request 
there, that it scarcely would bring the lowest price that it could be 
procured for, and consequently it is not produced; but elsewhere, it 
is both produced and consumed in great quantities. 

When the price of any object is legally fixed below the charges of 
its production, the production of it is discontinued, because nobody 
is willing to labour for a loss: those, who before earned their liveli- 
hood by this branch of production, must die of hunger, if they find 
no other employment; and those, who could have purchased the 
product at its natural price, are obliged to go without it. The 
establishment of the fixed rate, or maximum, is a suppression of a 
portion of production and consumption; that is to say, a diminution 
of the prosperity of the community, which consists in production 
and consumption. Even the produce already existing is not so pro- 
perly consumed as it should be. For, in the first place, the pro- 
prietor withholds it as much as possible from the market. In the 
next, it passes into the hands, not of those who want it most, but of 
those who have most avidity, cunning, and dishonesty; and often 
with the most flagrant disregard of natural equity and humanity. A 
scarcity of corn occurs; the price rises in consequence; yet still it is 
possible, that the labourer, by redoubling his exertions, or by an in- 
crease of wages, may earn wherewithal to buy it at the market 
price. In the mean time, the magistrate fixes corn at half its natural 
price: what is the consequence? Another consumer, who had al- 
ready provided himself, and consequently would have bought no 
more corn had it remained at its natural price, gets the start of the 
labourer, and now, from mere superfluous precaution, and to take 
advantage of the forced cheapness, adds to his own store that por- 
tion, which should have gone to the labourer. The one has a dou- 
ble provision, the other none at all. The sale is no longer regulated 
by the wants and means, but by the superior activity of the pur- 
chasers. It is, therefore, not surprising, that a maximum of price 
on commodities should aggravate their scarcity. 

A law, that simply fixes the price of commodities at the rate they 
would naturally obtain, is merely nugatory, or serves only to alarm 
producers and consumers, and consequently to derange the natural 
proportion between the production and the demand; which propor- 
tion, if left to itself, is invariably established in the manner most 
favourable to both. 

Hope, fear, malevolence, benevolence, in short, every human pas- 
sion or virtue may influence the scale of price. But it is the pro- 
vince of moral science to estimate the intensity of their effect upon 
actual price in every instance, which is the only thing we are here 
to attend to. Neither need we advert to the operation of the causes 
of a nature purely political, that may operate to raise the price of a 

* A pickle made of the roe of sturgeons, aTavourite condiment of Russian diet. 



296 ON DISTRIBUTION. book ii. 

product above the degree of its real utility. For these are of the 
same class with actual robbery and spoliation, which come under the 
department of criminal jurisprudence, although they may intrude 
themselves into the business of the distribution of wealth. The 
functions of national government, which is a class of industry, whose 
result or product is consumed by the governed as fast as it is pro- 
duced, may be too dearly paid for, when they get into the hands of 
usurpation and tyranny, and the people be compelled to contribute 
a larger sum than is necessary for the maintenance of good govern- 
ment. This is a parallel case to that of a producer without competi- 
tors, whether he have got rid of them by force, or by accidental 
circumstances. He may raise his product to what price he will, 
even to the extreme limit of the consumer's ability, if his monopoly 
be seconded by authority. But it is the province of the political 
philosopher, and not of the political economist, to teach us how this 
evil may be avoided. In like manner, although it be the province 
of ethics, or of the knowledge of the moral qualities of man, to teach 
the means of ensuring the good conduct of mankind, in their mutual 
relations, yet, whenever the intervention of a superhuman power 
appears necessary to effect this purpose, those who assume to be the 
interpreters of that power must be paid for their service. If their 
labour be useful, its utility is an immaterial product, which has a 
real value; but, if mankind be nowise improved by it, their labour, 
not being productive of utility, that portion of the revenues of so- 
ciety, devoted to their maintenance, is a total loss; a sacrifice with- 
out any return. 

With the most earnest wish to confine myself within my subject, 
it is impossible to avoid sometimes touching upon the confines of 
policy and morality, were it only for the purpose of marking out 
their points of contact. 



CHAPTER II. 

OF THE SOURCES OF REVENUE. 



It has been shown in Book I., that products are raised by the 
productive means at the command of mankind, that is to say, by 
human industry, capital, and natural powers and agents. The pro- 
ducts thus raised, form the revenue of those possessed of these means 
of production, and enable them to procure such of the necessaries 
and comforts of existence, as are not furnished gratuitously, either 
by nature, or by their fellow creatures. 

The exclusive right to dispose of revenue is a consequence of the 
exclusive right, or property, in the means of production; and such 
of them, as are not the subject of human appropriation, are not either 



CHAP. II. ON DISTRIBUTION. 297 

items of productive means, or sources of revenue; they form no part 
of human wealth, which implies appropriation and exclusive pos- 
session; for there is no such thing as wealth, unless where property- 
is known and established, and where possession is both acknow- 
ledged and secured. 

The origin or the justice of the right of property, it is unnecessary 
to investigate, in the study of the nature, and progress of human 
wealth. Whether the actual owner of the soil, or the person from 
whom he derived its possession, have obtained it by prior occu- 
pancy, by violence, or by fraud, cain make no difference whatever 
in the business of the production and distribution of its product or 
revenue. 

Perhaps it is scarcely necessary to remark, that property in that 
class of productive means, which has been called human industry, 
and in that distinguished by the general name of capital, is far more 
sacred and indisputable, than in the remaining class of natural 
powers and agents. The industrious faculties of man, his intelli- 
gence, muscular strength, and dexterity, are peculiar to himself and 
inherent in his nature. And capital, or accumulated produce, is the 
mere result of human frugality and forbearance to exercise the 
faculty of consuming, which, if fully exerted, would have destroyed 
products as fast as they were created, and these never could have 
been the existing property of any one; wherefore, no one else, but 
he who has practised this self-denial, can claim the result of it with 
any show of justice. Frugality is next of kin to the actual creation 
of products, which confers the most unquestionable of all titles to 
the property in them. 

These several sources of production are some of them alienable, 
as land, implements of arts, &c. ; and some inalienable, as personal 
faculties. Some also are consumable, as are all the items of floating 
capital; others, inconsumable, as land. Some, too, there are, that 
are neither alienable nor consumable, yet are capable of destruction; 
as the human faculties, intellectual and corporeal, which vanish with 
human existence. 

Such as are capable of consumption, as, for instance, the floating 
values, whereon production expends its energies, may be consumed 
either in such manner as to occasion a re-production, in which case 
they will still constitute a part of the means of production; or in 
such manner as to yield no further production, in which case they 
cease to form any part of those means, and are devoted to pure de- 
struction, more or less rapid. 

Although revenue, as well as the sources of production, is a con- 
stituent part of individual wealth, yet no one is reputed to reduce 
his fortune by the consumption of his revenue only, provided that 
he does not encroach upon his productive means; because revenue 
is a regenerating product, whereas the means of production, so long 
as they continue to exist, are a constant and perpetual source of new 
products. 

The current value of these appropriable sources of production is 
38 



298 ON DISTRIBUTION. book ii. 

established on the same principles, as that of all other objects; that 
is to say, by the conflicting influence of supply and demand. The 
only remark that need be made upon it is, that the demand does not 
originate in the enjoyment anticipated from the immediate use of 
the particular source; for a field or an implement of trade yield to 
the owner no direct enjoyment, which is capable of estimation; their 
value has reference to the value of the product they are capable of 
raising, which itself originates in the utility of that product, or the 
satisfaction it may be capable of aflTording. 

With regard to those sources, that are inalienable, as are the 
human faculties of mind and body, they can never be the subject of 
actual exchange, and their value is a matter of mere mental estima- 
tion, grounded upon the value they may be capable of producing. 
Thus, the productive means of this description, which yield to an 
artisan the wages of 1 dollar a day, or of 365 dollars a year, may 
be reckoned equivalent to a vested capital yielding an equal annual 
revenue. 

And now that we have taken this general and cursory view of 
the sources of production and of revenue in the abstract, we may 
enter upon a more minute analysis of their nature, which will lead 
us into the labyrinth of the science of political economy, and furnish 
us with a clue to some of its most intricate windings. 

The immediate result of these sources is not, strictly speaking, a 
product, but a productive service that helps us to a product. Pro- 
ducts should, therefore, be considered as the result of an interchange 
of productive service on the one hand, and of actual products on 
the other, subsequently to which, revenue appears for the first time 
in the shape of products; and these again may be exchanged for 
other products, into which latter form the same revenue will then 
be converted. 

The conception of this matter will be rendered clearer by a prac- 
tical illustration. A piece of arable land yields an annual product, 
say of 300 bushels of wheat, whereof 200 bushels more or less, may 
be considered as resulting from the agency of the capital and in- 
dustry employed in its cultivation, and the' remaining 100 bushels 
as resulting from the natural productive powers of the soil. The 
revenue, yielded by the land to the proprietor, will have appeared 
first in the way of concurring productive service afforded by the 
object of property, the land: which productive service will have 
been transferred or lent to the cultivator for the sum of 100 bushels 
of wheat, and this will be the first act of exchange. If these 100 
bushels of wheat be converted into specie, either by the proprietor 
himself or by the cultivator on his behalf, and in consequence of a 
mutual arrangement, this specie will still be the same identical 
revenue, though under the secondary form of money. 

This analysis will conduct us to a knowledge of the real value of 
revenue, which falls in with the general definition of value given 
in the preceding chapter, namely, the amount of other objects 
obtainable by exchange for the object of intended transfer. What, 



CHAP. II. ON DISTRIBUTION. 299 

then, is the object of transfer, for which revenue is given in 
exchange? why, the productive service of those means, that the 
receiver of revenue may be possessed of. And what is obtained by 
the primary act of exchange, which we designate production? why, 
products. Wherefore, the value of revenue is large in proportion, 
not to the value, but to the quantity of the product obtained, to the 
sum total of utility created. 

Thus we find, that the ratio of national revenue, in the aggregate, 
is determined by the amount of the product, and not by its value.* 
It is not so with individual revenue; because a variation in the rela- 
tive value of different products will operate to swell that of one 
individual, or class, at the expense of another. 

Could each member oT society live on the primary products 
whereof his revenue is composed, the relative degree of revenue 
would, like that of nations, in the aggregate, depend upon the 
amount of the product, upon the sum of utility created, and not 
upon its exchangeable value. But, in a state of society at all 
elevated above barbarism, this is impossible; each individual 
consumes a much less quantity of his own peculiar product, than 
of those of other people, which he buys with his own. The grand 
point, therefore, of individual importance to the producer is, the 
quantity of product not of his own creation, which he may be able 
to procure with his own productive means, or with the products 
created by their agency. Suppose, for instance, the land, capital, 
and personal faculties of a particular individual to be engaged in the 
cultivation of saffron; as he will probably himself consume little or 
no saffron, his revenue Avill consist of such other objects, as his 
annual crop of saffron can be exchanged for; and the ratio of that 
revenue will be elevated by a rise in the price of saffron; while that 
of the consumers of that article will be proportionately reduced to 
the full extent of the rise of its price. On the contrary, their reve- 
nue will be augmented in like manner by a fall of its price, to the 
prejudice of the revenue of the grower. 

Every saving in the charges of production, that is to say, every 
saving in the productive agency exerted to raise the sameproduct,is an 
increase of the revenue of the community to an equal extent; as, for 
example, the contrivance to raise as much upon one acre of land as 
before upon two, or to effect with two days' labour, what before 
required as much as four; for the productive agency thus released 
may be directed to the increase of production.(a-) And this acces- 

* Hence the futility of any attempt to compare the wealth of different nations, 
of France and E ngland for instance, by comparison of the value of their respective 
national products. Indeed, two values are not capable of comparison, when placed 
at a distance from each other. The only fair way of comparing the wealth of 
one nation with that of another, is, by a moral estimate of the individual welfare 
in each respectively. 

(o) And will be so for the most part, though not entirely, wherever the mem- 
bers of the community have no other hope of subsistence, than from the product 



300 ON DISTRIBUTION. book ii. 

sion of revenue will accrue to the individual benefit of the contriver, 
so long as the contrivance can be confined to his own knowledge; 
but to that of consumers at large, as soon as the notoriety shall have 
awakened competition, and obliged him to limit his profits to the 
actual charges of production. 

However revenue may be transformed by the various acts of 
exchange, commencing with the productive agency, which is the 
primitive exhibition of revenue, it remains the same in substance, 
until the moment of its ultimate consumption. The revenue yielded 
by an acre of arable land remains, in reality, the same, both after its 
primary exchange, by the act of production, into the form of wheat, 
and after its secondary transformation into silver coin, even although 
the wheat have been consumed by the purchasers. But, as soon as 
the revenued individual converts his silver coin into an object of 
consumption, and that object is simply consumed, the value of his 
revenue thenceforth ceases to exist, and is destroyed and lost, 
although the silver coin, whose form it once assumed, continue in 
existence. It must not be imagined still to exist in the hands of the 
temporary holder of the coin, although lost to the receiver of reve- 
nue; but is equally lost to mankind at large; for the actual holder of 
the coin must have obtained possession of it by the transfer of other 
revenue of his own, or of some source of revenue before in his own 
possession. 

When revenue is added to capital, it thenceforth ceases to be 
revenue, or, as such, to be capable of satisfying the wants of the 
proprietor; it can only yield an increased revenue, being an item of 
productive capital, consumable in the manner of capital, that is to 
say, in such way as to yield a product in exchange and return for 
the value consumed. 

When capital or land, or personal service, is let out to hire, its 
productive power is transferred to the renter or adventurer in pro- 
duction, in consideration of a given amount of products agreed upon 
beforehand. It is a sort of speculative bargain, wherein the renter 
takes the risk of profit and loss, according as the revenue he may 
realize, or the product obtained by the agency transferred, shall ex- 
ceed or fall short of the rent or hire he is to pay. Yet one revenue 
only can be realized; and, though a borrowed capital may yield to 

of their own productive means; for the whole surplus of revenue thus created, is 
sure to go, in the end, to the appropriators of the natural sources of production; 
leaving those, whose productive means are merely personal, to employ them upon 
some other object, or upon an enlarged production of the same object. And this 
is a complete answer to the position of Sismondi and Malthus, that economy of 
human productive exertion makes the multiplication of unproductive consumers, 
not only probable, but necessary. But where a poor-law or monastic establish- 
ment provides for the subsistence of the human agency thus rendered superfluous, 
there will probably be no increase of national revenue consequent upon a saving 
of productive agency; for the surplus labour is thereby released from the neces- 
sity of exertion in some other channel. With such institutions, the enlargement 
of productive power by machinery or otherwise may be very great, without any 
enlargement of national production, revenue, or wealth. T. 



CHAP. III. ON DISTRIBUTION. 301 

the adventurer an annual product of 10 per cent, instead of 5 per 
cent which he pays in the shape of interest, yet the revenue of the 
capital, the productive service it affords, will not be 10 per cent; for 
in that gross product is included the recompense of the productive 
agency, both of the capital and of the industry that has turned it to 
account. 

The actual revenue of each individual is proportionate to the 
quantity of products at his disposal, being either the immediate fruit 
of his productive means, or the result of those transformations from 
its primitive state, which his revenue may have undergone, until it 
have assumed the shape of the ultimate object of his consumption. 
The ratio of that quantity, or of utility inherent in it, can only be 
estimated from its current price in the dealings of mankind. In 
this sense, the revenue of an individual is equal to the value derived 
from his productive means; which value, however, is the greater, 
in respect to the objects of his consumption, in proportion to the 
cheapness of those objects, which augments his command of other 
than his own immediate products. 

In like manner, the revenue of a nation is the more considerable, 
in proportion to the intensity of the value whereof it consists, i. e. 
of the value of its aggregate productive powers, and to its high rela- 
tive degree to the value of the objects of external attainment. The 
value of productive agency must be high, even where that of pro- 
ducts is low; for it should be always recollected, that, since the in- 
tensity of value depends upon the quantity of objects obtainable in 
exchange, revenue, or, in other words, the agency of the national 
sources of production, is large, in proportion to the abundance and 
cheapness of the products derived from them. 



CHAPTER III. 

OF REAL AND RELATIVE VARIATION OF PRICE. 

The price of an article is the quantity of money it may be worth; 
curi'ent price, the quantity it may be sure of obtaining at the parti- 
cular place. Its locality is material, for the desire of a specific ob- 
ject varies in relation to the quantity procurable according to the 
locality. 

The price obtained upon the sale of an article represents all other 
articles procurable with that price. To say, that the price of an ell 
of broad-cloth is 8 dollars, implies, that it is exchangeable either for 
so much coined silver, or for so much of any other product or pro- 
ducts as may be procurable with that sum. Money-price is selected 
for the purposes of an illustration, in preference to price in com- 
modities at large, merely for greater simplicity; but the real and ulti- 
mate object of exchange is, not money, but commodities. 



302 OJN DISTRIBUTION. book ii. 

Price, in this sense, may be divided into buying price and selling 
price; that is to say, the price given to obtain possession of an object, 
and the price obtainable for the relinquishment of its possession. 
f The price paid for every product, at the time of its original attain- 
ment or creation, is, the charge of the productive agency exerted, 
or the cost of its productiob.* Tracing upwards to this original 
price of a product, we unavoidably come to other products; for the 
charge of productive agency can only have been defrayed by other 
products. The daily wages of the weaver engaged in producing 
broad-cloth are products; they consist either of the articles of his 
daily subsistence, or of the money wherewith he may procure them: 
both which are equally products. Wherefore the production, as 
well as the subsequent interchange of products, may be said to re- 
solve itself into a barter of one product for another, conducted upon 
a comparison of their respective current prices. But there is one 
important particular, that requires the most assiduous attention, the 
neglect or oversight of which has led to abundance of error and mis- 
representation, and has made the works of many writers calculated 
only to mislead the students in this science. 

An ell of broad-cloth, that has, in the production, required the 
purchase of productive agency at the price of 8 dollars, will have 
cost that sum in the manufacture; but if three-fourths only of that 
productive agency can be made to suffice for its production; if, sup- 
posing one kind of productive agency only to be requisite, 15 in- 
stead of 20 days' labour of a single workman be enabled to complete 
the product, the same ell of broad-cloth will cost but 6 dollars to the 
producer, at the same rate of wages. In this case, the current price 
of human productive agency will have remained the same, although 
the cost of production will have varied in the ratio of the difference 
between 6 dollars and 8 dollars. But, as this difference in the rela- 
tion between the cost of production and the current price of the 
product holds out a prospect of larger profit than ordinary in this 
particular channel, it naturally attracts a larger proportion of pro- 
ductive agency, the exertion of which, by enlarging the supply, 
reduces again the current price to a level with the bare cost of pro- 
duction. t 

This kind of variation in the price of a product I shall call real 
variation of price, because it is a positive variation, involving no 
equivalent variation in the object of exchange, and both may, and 
actually does occur, without any cotemporaneous variation of the 
price, either of productive agency, of the products wherewith it is 
recompensed, or of those, for which the specific object of this real 
variation is procurable. 

* Vidt Wealth of Nations, book i. c. 5. 

I The cost of production is wiiat Smith calls the natural price of products, as 
contrasted with their current or market price, as he terms it. But it results from 
what has been said above, that every act of barter or exchange, among the rest 
even that implied in the act of production, is conducted with reference to current 
price. 



CHAP. III. ON DISTRIBUTION. 303 

It is otherwise with regard to the variation of price of products 
already in existence one to another, without reference to their re- 
spective cost of production. When the wine of the last vintage, 
that a month before sold at 40 dollars the ton, will fetch no more 
than 30 dollars, money and all other objects of desire to the wine- 
vender have actually advanced in price to him; for the productive 
agency exerted in raising the wine, receives a recompense of but 30 
dollars, instead of 40 dollars in money, and of commodities in alike 
proportion, which is an abatement of i; whereas, in the instance 
above cited, an equal amount of productive agency w^ill receive an 
equal recompense in all other products; for a degree of agency, 
which has both cost and received 6 dollars, wdll be equally well paid 
with one that has cost and received 8 dollars. 

In the former case, then, of a 7'eal variation, the wealth of the 
community will have received an accession; in the latter, of re/a^i'ye 
variation, it will have remained stationary; and for this plain reason; 
because, in the one case all the purchasers of cloth will be so much 
the richer, without the seller being any poorer; while in the other, 
the gain of the one class will be exactly equipoised by the cor- 
responding loss of the other. In the former case, a larger amount 
of products will be procured with an equal charge of production, 
and without any alteration in the revenues of either buyers or sell- 
ers: there will be more actual wealth, more means of enjoyment, 
without any increased expenditure of productive means; the aggre- 
gate utility will be augmented; the quantum of products procurable 
for the same price will be enlarged; all which are but varied ex- 
pressions of the same meaning. 

But whence is derived this accession of enjoyment, this larger 
supply of wealth, that nobody pays for? From the increased com- 
mand acquired by human intelligence over the productive powers 
and agents presented gratuitously by nature. A power has been 
rendered available for human purposes, that had before been not 
known, or not directed to any human object; as in the instance of 
wind, water, and steam-engines: or one before known and available 
is directed with superior skill and effect, as in the case of every im- 
provement in mechanism, whereby human or animal power is as- 
sisted or expanded. The merit of the merchant, who contrives, by 
good management, to make the same capital suffice for an extended 
business is precisely analogous to that of the engineer, who simpli- 
fies machinery, or renders it more productive. 

The discovery of a new mineral, animal, or vegetable, possessed 
of the properties of utility in a novel form, or in a greater degree of 
abundance or perfection, is an acquisition of the same kind. The 
productive means of mankind were amplified, and a larger product 
rendered procurable by an equal degree of human exertion, when 
indigo was substituted for woad, sugar for honey, and cochineal for 
the Tyrian dye. In all these instances of improvement, and those 
of a similar nature that may be hereafter efiected, it is observable, 
that, since the means of production placed at the disposal of man- 



304 ON DISTRIBUTION. book ii. 

kind become in reality more powerful, the product raised always 
increases in quantity, in proportion as it diminishes in value. We 
shall presently see the consequences of this circumstance.* 

A fall of price may be general and affect all commodities at once; 
or it may be partial and affect certain commodities only; as I shall 
endeavour to explain by example. 

Suppose that, when stockings were made by knitting only, thread- 
stockings, of a given quality, amounted to the price of 1 dollar the 
pair. Hence, we should infer, that the rent of the land whereon the 
flax was grown, the profits upon the labour and capital of the culti- 
vators, those of the flax-dresser and spinner, with those likewise of 
the stocking-knitter, amounted altogether to the sum of a dollar for 
each pair of stockings. Suppose that, in consequence of the inven- 
tion of the stocking-machine, 1 dollar will buy two pair of stockings 
instead of one. As the competition has a tendency to bring the 
price to a level with the cost of production, we may infer from this 
reduced price, that the outlay in land, capital, and labour, necessary 
to produce two pair of stockings, is still no more than 1 dollar; thus, 
with equal means of production, the product raised is doubled in 
quantity. And what is a convincing proof that this fall is positive, 
is the fact, that every person, of what profession soever, may thence- 
forward obtain a pair of stockings with half the quantity of his own 
particular product. A capitalist, the holder of 5 per cent stock, w^as 
before obliged to devote the annual interest of 20 dollars to the pur- 
chase of a pair of stockings;, he now gives the interest of 10 dollars 
only. A tradesman selling his sugar at 33§ cents per lb. must be- 
fore have sold 3 lb. of sugar to buy a pair of stockings, now he need 
hut sell I2 lb.: he therefore sacrifices in the pair of stockings only 
half the means of production he formerly devoted to the acquisition 
of the same object. 

We have hitherto supposed this product alone to have fallen in 
price. Let us suppose two products to fall, stockings and sugar: 
that by an improvement of commerce, 1 lb. of sugar cost 22 cents 
instead of 33 cents. In this case, all purchasers of sugar, including 
the stocking-maker, whose product has likewise fallen, will sacrifice, 
in the purchase of 1 lb. of sugar, but half the productive means, 
which they before allotted for that purpose. 

The truth of this position may be easily ascertained. When sugar 
was at 33§ cents per lb. and stockings at a dollar the pair, the stock- 

* Within the last hundred years, the improvements of industry, effected by 
the advance of human knovi^ledge, more especially in the department of natural 
science, have vastly abridgecl the business of production; but the slow progress 
in moral and political science, and particularly in the branch of social organiza- 
tion, has hitherto prevented mankind from reaping the full benefit of those im- 
provements. Yet it would be wrong to suppose they have reaped none at all. 
The pressure of taxation has indeed been doubled, tripled, or even quadrupled; 
yet population has increased in most countries of Europe; which is a sign, that 
a portion at least of the increase of products has fallen to the lot of the subject; 
and the population, besides being augmented, is likewise better lodged, clothed, 
and conditioned, and I believe better fed too, than it was a century ago. 



CHAP. III. ON DISTRIBUTION. 305 

ing-maker was obliged to sell one pair of stockings, before he could 
buy 3 lbs, of sugar; and. as the charges of producing this pair 
of stocldngs were one doliar, he in reality bought 3 lbs. of sugar at 
the price of a dollar value in his own productive means; in' like 
manner as the grocer bouglit a pair of stockings for 3 lbs. of sugar, 
that is to say, in his case also, for one dollar value of his peculiar 
productive means. But when both these commodities have fallen 
to half their price, one pair only, or productive means equivalent'to 
50 cents, would buy 3 lbs. of sugar; and 3 lbs. of sugar, procurable 
at a charge of production amounting to 50 cents, will suffice to pur- 
chase a pair of stockings. Wherefore, if two kinds of products, 
which we have set one against the other, and supposed to pass in 
exchange the one for the other, can both have fallen in price at the 
same time, are we not authorized to infer, that this fall is a positive 
fall, and has no reference or relation to the prices of commodities 
one to another? that commodities in general may fall at one and the 
same time, some more, some less, and yet that the diminution of 
price may be no loss to any body? 

It is for this reason, that, in modern times, although wages stand 
in nearly the same relation to corn as they did four or five hundred 
years ago, yet the lower classes now enjoy many luxuries, that were 
then denied them; many articles of dress and household furniture, 
for instance, have suffered a real diminution of value; and that the 
same individuals are more scantily supplied with others, as with 
butcher's meat and game,* because they have sustained a real 
increase of value. 

Every saving in the cost of production implies the procurement, 
either of an equal product by the exertion of a smaller amount of 
productive agency, or of a larger product by the exertion of equal 
agency, which are both the same thing; and it is sure to be followed 
by an enlargement of the product. It may be thought, perhaps, 
that this increase of production may possibly take place without any 
corresponding increase of demand; and, therefore, that the price 

* I find in the Recherches of Dupre de Saint Maur, that in 1342, an ox was sold 
for from 10 to 11 litres tournois. This sum then contained 7 oz. of fine silver, 
which was worth about 28 oz. of the present day; and 28 oz. of our present mo- 
ney are coined into 171 fr. 30 c, (32 dollars,) which is lower than the price of an 
ordinary ox. A lean ox bought in Poitou for 300 fr., and afterwards fatted in 
Lower Normandy, will sell at Paris for from 450 to 500 /r. (84 to 93 dollars.) 
Butcher's meat has, therefore, more than doubled in price since the 14th cen- 
tury; and probably most other articles of food likewise; and, if the labouring 
classes had not at the same time been greatly benefited by the progress of indus- 
try, and put in possession of additional sources of revenue, they w'ould be worse 
fed than in the time of Philip of Valois. 

This may be easily explained. The growing revenues of the industrious 
classes have enabled them to multiply, and consequently to swell the demand for 
all objects of food. But their supply can not keep pace with the increasing de- 
mand, because, although the same surface of soil may be rendered more produc- 
tive, it can not be so to an indefinite degree and the supply of food by the channel 
of external commerce, is more expensive than by that of internal agriculture, on 
account of the bulky nature of most of the articles of aliment. 
39 



306 ON DISTRIBUTION. book ii. 

current of the product may fall below the cost of its production, 
even on its reduced scale. But this is a groundless apprehension; 
; for the fall of price tends so strongly to expand the sphere of con- 
sumption, that, in all the instances I have been able to meet with, 
the increase of demand has invariably outrun the increasing powers 
of an improved production, operating upon the same productive 
means; so that every enlargement of the power of productive agency 
ha*s created a demand for more of that agency, in the preparation of 
the product cheapened by the improvement. 

Of this a striking example has been afforded by the invention of 
the art of printing. By this expeditious method of multiplying the 
<fopies of a literary v^ork, each copy costs but a twentieth part of 
what was before paid for manuscript; an equal intensity of total 
demand, would, th^efore, take oflf only twenty times the number of 
copies; but probably it is within the mark to say, that a hundred 
times as many are now consumed. So that, where there was for- 
merly one copy only of the value of 12 dollars of present money, 
there are now a hundred copies, the aggregate value of which is 60 
dollars, though that of each single copy be reduced to 1-20. Thus 
the reduction of price, consequent upon a real variation, does not 
occasion even a nominal diminution of wealth. '^ 

On the other hand, and by the rule of contraries, as a real advance 
of price must always proceed from a dejficiency in the product 
raised by equal productive means, it is attended by a diminution in 
the general stock of wealth; for the rise of price upon each portion 
does not counterpoise the reduction that takes place in the total 
quantity of the commodity; to say nothing of the greater relative 
dearness of the object of consumption to the consumer, and of his 
consequent impoverishment in comparison. 

Suppose a murrain, or a bad system of management, to cause a 
scarcity of any kind of live stock, of sheep for instance, the price 
will rise, but not in proportion to the reduction of the supply; 
because in proportion as they grow dearer, the demand will decrease. 
If there were but one-fifth of the present number of sheep, it is very 
probable their price would advance to no more than double; so, that 
in place of five sheep, which might together be worth 20 dollars at 
4 dollars each, there would remain but one valued at 8 dollars. 
The diminution of wealth in the article of sheep, notwithstanding 
the increased price, must therefore be computed at 60 per cent, 
which is considerably more than a moiety.t 

* Our data in relation to the products of former times are too few to enable us to 
deduce from them any precise result; but those at all acquainted with the subject 
will see, that, whether over or under-stated, will make no difference in the rea- 
soning. The statistic researches of the present generation will provide future 
ages with more accurate means of calculation, but will add nothing to the solidity 
of the principles upon which it must be made. 

f Of this nature is the evil effects of taxation, (especially if it be exorbitant,) 
upon the general wealth of the community, independently of its effect upon the 
individual assessed. The cost of production, and consequently the real price of 
commodities, is aggravated thereby, and their aggregate value diminished. 



CHAP. III. ON DISTRIBUTION. 307 

Thus, it may be affirmed, that every real reduction of price, 
instead of reducmg the nominal value of produce raised, in point of 
fact, augments it; and that a real increase of price reduces, instead of 
adding to the general wealth; to say nothing of the quantum of 
human enjoyment, which in the former case is multiplied, and in the 
latter abridged. Besides it would be a capital error to imagine, that 
a real fall of price, or in other words, a reduction in the price paid • 
to productive exertion, occasions as much loss to the producer as 
gain to the consumer. A real depreciation of commodities is a 
benefit to the consumer, without curtailing the profits of the pro- 
ducer. The stocking-maker, who, for one dollar manufactures two 
pair of stockings instead of one, gains as much upon that sum as if 
it were the price of a single pair. The landed proprietor receives 
the same rent, although, by a better rotation of crops, the tenant 
should multiply and cheapen the produce of his land. Whenever, 
without additional fatigue to the labourer, means are devised to 
double the quantity of work he can perform, the ratio of his daily 
gains is not reduced, although his product is sold at a lower price.* 
This will serve to confirm and explain a maxim, which has been 
hitherto imperfectly understood, and even disputed by many writers, 
and sects of political reasoners; namely, that a country is rich and 
plentiful, in proportion as the price of commodities is low.t 

For argument's sake, I will put the matter in the most favourable 
light for those who dispute this maxim, and suppose them to urge an 
extreme case, namely, that, by successive economical reductions, the 
charges of production are at length reduced to nothing; in which 
case, it IS evident there can no longer be rent for land, interest upon 

* I have met with persons, who imagined themselves adding to national wealth, 
by tavounng the production of expensive, in preference to that of cheaper articles. 
in their opinion, it is better to make a yard of rich brocade than one of common 
sarsenet. _ Ihey do not consider, that, if the former costs four times as much as 
the latter, it is because it requires the exertion of four times as much productive 
agency, which could be made to produce four yards of the latter, as easily as one 
ot the former. The total value is the same; but society derives less benefit; for 
a yard of brocade makes fewer dresses than four yards of sarsenet. It is the 
grand curse of luxury, that it ever presents meanness in company with mao-nifi- 



cence. 



t Dupont de Nemours {Physiocratie. p. 117.) says, that "it must not be sup- 
posed, tJiat the cheapness of commodities is advantageous to the lower classes; 
lor the reduction of prices lessens the wages of the hbounor, curtails his cora- 
lorts, and affords him less work and lucrative occupation." But theory and 
practice both controvert this position. A fall of wages, occasioned solely by a 
tall in the price of commodities, does not diminish the comforts of the labourer; 
and, inasmuch as the low price of wages enables the adventdrcr to produce at a 
less exjpense, it tends powerfully to promote the vent and demand for the pro- 
duce of labour. 

Melon, Forbonnais, and all the partisans of the exclusive system, or balance of 
trade, concur with the economists in this erroneous opinion; and it has been re- 
affirmed by Slsmondi, in his Nouveaux Pnn. d'Econ. Fol. liv. iv. o. 6.; where 
the lower price of products is treated as an advantage gained by the consumer 
upon the producer, in despite of the obvious impossibility of any loss to the 
labouring or other productive classes, by a reduction tantamount only to the 
saving m the cost of production. 



308 ON DISTRIBUTION. bookii. 

capital, or wages on labour, and consequently, no longer any revenue 
to the productive classes. What then? Why then, I say, these 
classes would no longer exist. Every object of human want would 
stand in the same predicament as the air or the water, which are 
consumed without the necessity of being either produced or pur- 
chased. In like manner as every one is rich enough to provide him- 
self with air, so would he be to provide himself with every other 
imaginable product. This would be the very acme of wealth. 
Political economy would no longer be a science; we should have no 
occasion to learn the mode of acquiring wealth; for we should find 
it ready made to our hands. 

Although there be no instance of a product falling to nothing in 
price, and becoming worth no more than mere water, yet some kinds 
have undergone prodigious abatements; as fuel in those places where 
coal pits have been discovered; and such abatements are so many 
approximations to that imaginary state of complete abundance, I 
have just been speaking of. 

If different commodities have fallen in different ratios, some more, 
others less, it is plain they must have varied in relative value to 
each other. That which has fallen, stockings, for instance, has 
changed its value relatively to that which has not fallen, as butch- 
er's meat; and such as have fallen in equal proportion, like stock- 
ings and sugar in our hypothesisj have varied in real though not in 
relative value. 

There is this difference between a real and a relative variation of 
price: that the former is a change of value, arising from an altera- 
tion of the charges of production; the latter, a change, arising from 
an alteration of the ratio of value of one particular commodity to 
other commodities. Real variations are beneficial to buyers, with- 
out injury to sellers; and vice versa; but in relative ones, what is 
gained by the seller is lost by the purchaser, and vice versa. A 
dealer, having in his warehouse 100,000 lbs. of wool at 20 cents per 
lb., is tvorth 20,000 dollars; if, by reason of an extraordinary de- 
mand, wool should rise to 40 cents per lb., that portion of his capi- 
tal will be doubled, but all goods brought to be exchanged for wool 
will lose as much in relative value as the wool will gain. A person 
in want of 100 lbs. of wool, who could before have obtained it by 
disposing, say of 20 bushels of wheat valued at 20 dollars, must now 
dispose of twice that quantity. He will lose the 20 dollars gained 
by the wool-dealer; and the nation be neither enriched nor im- 
poverished.* 

* The Earl of Lauderdale published in 1807, a work, entitled, " Researches on 
the Nature and Origin of Public Wealth, and on the Causes which concur in its 
Increase;^'' the whole reasoning of which is built on this erroneous proposition, 
that the scarcity of a commodity, though it diminish the wealth of society in the 
aggregate, augments that of individuals, by increasing the value of that commo- 
dity in the hands of its possessors. Whence the author deduces the unsound 
conclusion, that national, differs in principle from individual wealth. He has 
not perceived, that, whenever a purchaser is obliged to make the acquisition by 
the sacrifice of a greater value, he loses just as much as the seller gains; and 



CHAP. III. ON DISTRIBUTION. 309 

When sales of this kind take place between one nation and an- 
other, the nation, that sells the commodity, which has advanced in 
relative price, gains to the amount of the advance, and the purchas- 
ing nation loses precisely to the same extent. Such a rise of price 
adds nothing to the general stock of wealth, existing in the world, 
Avhich can only be enlarged by the production of some new utility, 
that may become the object of price or estimation; whereas, in other 
cases, one always loses what another gains: and so it is with all 
kinds of jobbing transactions, founded upon the fluctuation of prices 
one upon another. 

In all probability, the time is not very distant, when the Euro- 
pean states, awake at length to their real interest, will renounce the 
costly rights of colonial dominion, and aim at the independent 
colonization of those tropical regions nearest to Europe; as of some 
parts of Africa. The vast cultivation of what are called colonial 
products, that would ensue, could not fail to supply Europe in the 
greatest abundance, and probably at most moderate prices. Such 
merchants as shall then have stock on hand, purchased at the old 
prices, certainly will make a loss upon that stock; but their loss will 
be a clear gain to the consumer, who will for a time enjoy this kind 
of produce, at a price inferior to the charge of production; the mer- 
chants will gradually replace their dear-bought produce, by other of 
equal quality, raised with superior intelligence; and the consumer 
will then reap the advantage of superior cheapness and multiplied 
enjoyment, with no loss to any body; for the merchant will both 
buy and sell cheaper; and human industry will have made a rapid 
stride, and opened a new road to affluence and abundance.* 

that every operation, designed to procure this kind of benefit, naust occasion to 
one party a loss, equivalent to the gain of another. 

He likewise refers this imaginary difference between the principle of public and 
of private wealth to this circumstance; that the accumulation of capital, which 
is an advantage to individual, is detrimental to national wealth, by obstructing 
the consumption, which is the stimulus of industry. He has fallen into the very 
common error of supposing, tliat capital is, by accumulation, withdrawn from 
consumption; whereas, on the contrary, it is consumed, but in a reproductive 
way, and so as to afford the means of a perpetual recurrence of purchase, which 
can occur but once in the case of unproductive consumption. Fide Book 
HI. infra. Thus it is, that a single error in principle, vitiates a whole work. The 
one in question is built upon this unsound foundation; and, therefore, serves only 
to multiply, instead of reducing the intricacies of the subject. («) 

* The vast means at the disposal of Napoleon might have been successfully 
directed to this grand object, and then he would have left the reputation of hav- 
ing contributed to civilize, enrich, and people the world; and not of having beeu 



(a) The error of Lauderdale is analogous to that o( Sismondi and of Malthus; 
and arises from the notion, that an extension of productive power makes an 
extension of unproductive consumption necessary; whereas, it is thereby ren- 
dered possible, or at the utmost probable only. The state, as well as its sub- 
jects, may consume in a way conducive to the further extension of productive 
power, and the state, like an individual, is powerful and wealthy in proportion 
to the extent of the productive sources in its possession, and to the fertility of 
those sources. T. 



310 ON DISTRIBUTION. book ii. 



CHAPTER IV. 

OF NOMINAL VARIATION OF PRICE, AND OF THE PECULIAR VALUE 
OF BULLION AND OF COIN. 

In treating of the elevation and depression of the price of com- 
modities, although value has been expressed in money, no notice 
has been taken of the value of money itself; which, to say the truth, 
plays no part in real, or even in relative variation of the price of 
other commodities. One product is always ultimately bought with 
another, even when paid for in the first instance in money. When 
the price of wool is doubled, it is purchased with twice the quantity 
of every other commodity, whether the exchange be made directly, 
or through the intermediate agency of money. The baker, who 
could have bought 1 lb. of wool with 6 lbs. of bread, or, with its 
price in money, say 20 cents, will be obliged to sacrifice 12 lbs. of 
bread to obtain the 40 cents necessary to purchase 1 lb. of wool at 
its advanced price. But, if it be proposed to compare together the 
rel?tive value, not of stockings, meat, sugar, wool, bread, &:c., but of 
any one of those articles with that of money itself, we shall find, that 
money, like all other commodities, may undergo, and often has, in 
fact, undergone a real variation; that is to say, a variation in the cost 
of its production; and a relative one, that is to say, a change of 
value, in comparison with other products. 

Since the discovery of the American mines, silver, having fallen 
to about a fourth of its former value, has lost three-fourths of its 
relative value to all other products, whose price has, meanwhile, 
remained stationary; as to that of corn, for instance; consequently, 
one must give 4 oz. of silver for 1 setier (about 43 bushels) of wheat, 
which, in the year 1500, was to be had for 1 oz. or thereabout. A 
commodity, which, since that period, may have fallen to half its 
price, while silver was falling to one-quarter, will, therefore, have 
doubled its relative value to silver, for this commodity then cost 1 
oz., and would now be worth 4 oz. of silver, had it not fallen itself 
in value; but having itself lost one-half its value, it is sold for but 2 
oz.; that is to say, for twice as much silver as at the former period. 

Such is the effect of real and of relative variation in the price of 
silver. But, independently of these variations, there have been vast 
alterations in the denomination given, at different periods during 
the interim, to the same quantity of pure metal, which should make 
us place very little reliance on the accuracy of our estimate of real 
and relative variation. 

In 1514, an ounce of silver would purchase 1 setier of wheat, 

its scourge and devastator. When the Barbary shore shall be lined with peace- 
ful, industrious, and polished inhabitants, the Mediterranean will bean immense 
lake, furrowed by the commerce of the wealthy nations, peopling its shores on 
every side. 



CHAP. IV. ON DISTRIBUTION. 311 

which is now worth 4 oz.; this was a relative variation of silver to 
wheat. This quantity of silver then was denominated 30 soiisf 
and, had the same quantity of silver still preserved the same deno- 
mination, 4 oz. would now be called 120*. or 6 fr. Thus, wheat at 
6fr. the setier would have risen in relation to silver, or silver have 
fallen in comparison with wheat. There would, however, have 
been no nominal variation. But 4 oz. of silver are now denominated 
24 fr. instead of 6/r.; so that there has been a nominal, as well as a 
relative variation,— a mere verbal alteration. The real and relative 
variation has been in the ratio of 4 to 1; but the nominal value of 
money has declined in the ratio of 16 to 1 since 1514. 

It is obvious, therefore, that one can not form an idea of the value 
of a commodity from its estimate of money price, except during a 
space of time, and within a space of territory, in which neither the 
denomination of the coin, nor the value of its material, has under- 
gone any change; else the valuation will be merely nominal, and 
convey no fixed idea of value whatever. To say that the setier of 
wheat sold for 30 sous in 1514, without explaining the then value 
of 30 sous, is giving us a price, that conveys either no idea at all, or 
a fallacious one, if it be meant to affirm, that the setter of wheat was 
then worth 30 sous of present money. In comparing values, the 
denomination of coin is useful only inasmuch as it designates the 
quantity of pure metal contained in the sum specified. It may serve 
to denote the quantity of the metal; but can never serve as an index 
of value at any distance of time, or of place. 

It is scarcely necessary to point out the effects of an alteration in 
the quantity of metal, to which a fixed denomination is given, upon 
national and individual property. Such an expedient can neither 
increase nor diminish the real, or even the relative value, either of 
the metal or of any other commodity. If 1 oz. of silver be struck 
into two crowns instead of one, two crowns will be paid wherever 
one was given before; that is to say, 1 oz. of silver will be given in 
either case: so that the value of silver will not have varied. But 
when a sale has been made on credit for a given time, and payment 
stipulated in crowns, the seller may be liable to receive i oz. in 
each crown, instead of 1 oz. according to the intention of the con- 
tracting parties. This transfer of the old denomination to a different 
portion of metal will, therefore, unjustly benefit the one party, to 
the injury of the other. For every profit to one individual is a loss 
to another, unless it arise from actual production, or from greater 
economy in the charges of production, which is equivalent to actual 
production. 

With regard to the peculiar and inherent value of bullion or of 
money, it originates, like that of all other commodities, in the uses 
to which It IS applicable, as we have before observed. The degree 
of that value is greater or less, according as its use is more or less 

*Traite Historique, Leblanc; and, Essai sur les Monnaies, by Dupre de Saint 



312 ON DISTRIBUTION. bookii. 

extensive, its employment more or less necessary, and its supply 
more or less abundant. 

Gold and silver, though the most common materials of money, 
can not act as such while in an uncoined state; they are then not 
money, but the raw material of money. In the present condition 
of society, every individual can not turn bullion into coin at his 
pleasure;, and, therefore, coin may be of considerably higher value 
than bullion of the same standard of weight and quality, if the 
demand for coin be more urgent than the demand for bullion. But 
bullion can never be perceptibly higher in value than coin of equal 
weight and quality; because the latter may be readily converted 
into the former. The reason why coin so seldom much exceeds 
bullion in value is, that the avidity of governments, which are 
monopolists of the business of coinage, to profit by the difference 
between coin and bullion, has led them into the error of overstock- 
ing the market with their manufacture of coin. Thus it is, that coin 
is never depressed in value below, and rarely much elevated above 
bullion. Wherefore, the detail of the circumstances, that have 
hitherto been, or may hereafter be, the occasion of variations in the 
intrinsic value of gold or silver bullion, will serve at the same time 
to explain the variations of their value in the peculiar character of 
money. 

It has already been noticed,* that the ten-fold supply of those 
metals, poured into the market in consequence of the discovery of 
America, did not effect a corresponding reduction of their value to 
1-10 of what it had before been. For the demand for them was at 
the same period greatly enlarged by the contemporaneous increase 
of commerce, manufacture, and luxury. All the leading states of 
Europe had before been wholly destitute of industry: the circulation 
of products, whether as capital or for mere consumption, was very 
trifling in amount. Industry and productive energy made a sudden 
and simultaneous effort all over Europe; and the commodity 
employed as the material of money, the agent of exchange, could 
not but come more in demand, upon the greater extent and fre- 
quency of mutual dealings. About the same time, the new route 
to the Eastern ocean, by rounding the Cape of Good Hope, was dis- 
covered, and drew abundance of adventurers into that direction; the 
products of the East obtained a more general consumption; but 
Europe, having no other products of her own to offer in exchange, 
was compelled to give the precious metals, of which India absorbed 
an immense quantity. Nevertheless, the multiplication of products 
tended to the increase and diffusion of wealth; mere higlers grew up 
into opulent merchants, and the fishing towns of Holland already 
reckoned amongst their citizens individuals worth 200,000 dollars. 
The costly objects, that none but princes could before aspire to 
possess, became attainable by the commercial classes; and the 
increasing taste for plate and expensive furniture created a greater 

* Supra book i, chap. 31. sect. 7. 



CHAP. IV. ON DISTRIBUTION. 3I3 

demand for gold and silver to be employed on those objects. 
Beyond all question, the value of those metals would have prodi- 
giously advanced had not the mines of America been then oppor- 
tunely discovered. ^^ 

Their discovery completely turned the scales. The rapid increase 
of the use and demand for gold and silver was far more than coun- 
terbalanced by the increasing supply, which completelv glutted the 
market. Hence the great reduction of their value, which has been 
be ore observed upon, and which would have been far greater still 
but lor the concurrence of the circumstances just stated, whereby the 
value ol SI ver, or its price in commodities at large, was checked in 
Its tail, and limited to one-fourth, instead of being depressed in equal 
ratio with the increased supplv, that is to say, to one-tenth. 

Ihis counteracting force must have escaped the penetration of 
J-.ocke, or he would not have said, that the tenfold increase of silver, 
since the year 1500, necessarily raised the price of commodities in 
a tentold degree. The few instances he migiit have cited in support 
ot his position, were by no means sufficient to establish its accuracy; 
tor a iar greater number and variety of products might be mentioned, 
lor which, as well as for silver, the demand compared with the sup- 
ply had increased in the ratio of 2^ to 1, between 1500 and the date 
ot the work of Locke in question.* But, although this may be true 
ot some particular products, it may not be so of abundance of others, 
lor some of which the demand has not advanced at all since 1500, 
while the supply of others has kept pace with the progressive 
demand, and consequently the ratio of their value remained station- 
ary, with the exception of trifling temporarv variations arising from 
causes oi a nature wholly distinct; which, bV the way, should^each 
us the necessity, in this science, of submitting insulated facts to the 
test of reasoning: for fact will not subvert theory, unless the whole 
of the facts applicable be taken into consideration, as well as the 
whole of the circumstances, that may vary the nature of those facts; 
which is hardly possible in any case. 

* The increased intensity of the demand for silver compared with its supply, 
consequent upon the discovery of America, is stated at 2 1-2 to 1, hecanse, but 
for this increase of demand, the tenfold supply would have reduced its vnluo to 
one-tenth ot what it had been previously to that event, and given to 100 oz. the 
value of 10 oz. only. But 100 oz. were only reduced to one-fourth of flieir 
former value, i.e. to the value of 25 oz.; which bears to 10 oz. the ratio of 2 1-2 
to I. This could not have been the case, unless the demand for silver, compared 
with the supply, had advanced in ttiat proportion. But the supply having- 
increased tenfold in the same interval, if we would find the ratio of the actual 
increase of the demand for silver, whether for the purposes of circulation, of 
luxury, or of manufacture, since the first discovery of the American mines, we 
must multiply 2 1-2 by 10, which will give 25. And probably this estimate 
will not exceed the truth, although 25 times may seem a prodigious advance. 
However, it would doubtless have been infinitely less considerable, but for the 
influx of supply from America; for the excessive dearness of silver would have 
greatly curtailed the use of it. Silver plate would probably be as rare as gold 
plate is now; and silver coin wduld be less abundant, because it would go fur- 
ther, and be of higher value. 
40 



314 ON DISTRIBUTION. book ii. 

The writers of the Encyclopedie have fallen into the same error, 
in stating,"* that a household establishment, wherein the silver plate 
should not have varied in quantity or quality from the middle of the 
sixteenth century to the present time, would be but one-tenth as rich 
in plate now as at the former period. Whereas, its comparative 
wealth would be reduced to one-fourth only; since, although the 
increase of supply has depressed that value to 10-100, the increase 
of demand, on the other hand, has raised it to 25-1 00. t 

It is deserving of attention, that the major part of the coin is in 
constant circulation, in the appropriate sense of the word, as defined 
above. In this respect it differs from most other commodities; for 
they are in circulation only so long as they are in the hands of the 
dealers, and retire from it as soon as transferred to the consumer. 
Money, even when employed as capital, is never desired as an object 
of consumption, but merely as one of barter; every act of purchase 
is an offer of money in barter, and a furtherance of its circulation. 
The only part withdrawn from circulation is what may be hoarded 
or concealed, which is always done with a view to its re-appearance. 

Gold or silver, in the shape of plate, embroidery, or jewellery, 
is in circulation only while in quest of, or in readiness for a purcha- 
ser; which it ceases to be, wiien it reaches the possession of the 
consumer. 

The general use of silver amongst all the civilized nations of the 
world, coupled with its great facility of transport makes it a commo- 
dity of such extensive demand, that none but a very large influx of 
fresh supply can sensibly affect its value. Thus, when Xenophon, 
in his essay on the revenues of Athens, urges his countrymen to 
give more assiduous attention to the working of the mines of Attica, 
by the suggestion, that silver does not, like other commodities, 
decline in value with the increase in quantity, he must be understood 
to say, that it does not perceptibly decline. Indeed, the mines of 
Attica were too inconsiderable in their product,- to influence the 
value of the stock of that metal then existing in the numerous and 
flourishing states upon the borders of the Mediterranean Sea, and in 
Persia and India; between all which and Greece the commercial 
intercourse was sufficiently active, to keep the value of silver sta- 
tionary in the Grecian market. The driblet of silver, furnished by 
Attician metallurgy, was a mere rivulet trickling into an ocean of 
existing supply. It was impossible for Xenophon to foresee the 
influx of the American torrent, or to guess at the consequence of its 
irruption. 

If silver were, like corn and other fruits of the earth, an object of 
human food and sustenance, the enlargement of the sources of its 

* Art. Monnaies. 

t If we are to believe Ricardo, the increase of demand has no effect upon 
value which is determined solely by the cost of production. He seems not to 
have perceived, that it is demand that makes productive agency an object of 
appreciation. A diminution of the demand for silver bullion would throw all 
those mines out of work, of which the lower scale of price was not adequate to 
the charges of bringing the product to market. 



CHAP. IV. ON DISTRIBUTION. 315 

supply would not have lowered its value; for the strong impulse of 
the human race, towards the multiplication of their species to a level 
with the means of sfibsistence, would have made the demand keep 
pace with the increase of supply. The tenfold multiplication of 
corn would be followed by a tenfold increase of the demand for it; 
inasmuch as it would engender new mouths to consume it; and corn 
would maintain nearly the same average of relative value to other 
commodities. 

This will explain, why the variations of the value of silver are 
both slow in operation, and considerable in amount. Their slow- 
ness is owing to the universality of the demand, which prevents 
a moderate variation of supply from being sensibly felt; and their 
magnitude to the limited uses of the metal, which prevent the 
increase of demand from keeping pace with a rapid increase of supply. 

Silver has utility for the purposes of plate, furniture, and orna- 
ment, as well as for those of money; and is the more copiously 
employed on those objects, in proportion to the degree of national 
wealth. Its use in the peculiar character of money is proportionate 
to the quantit)^ of moveable and immoveable objects of property, that 
there may be to be circulated; wherefore, coin would be more abun- 
dantly required in rich than in poorer nations, were not the follow- 
ing circumstances to control this general rule. 

1. The superior rapidity of circulation, both of money and com- 
modities in a state of national opulence, which makes a smaller 
quantity of money requisite, in proportion to the total of commer- 
cial dealings. The same sum in a rich country will effect perhaps 
ten successive operations of exchange in the same space of time, as 
one in a poor countrv.* Wherefore, the multiplication of commo- 
dities to be circulatea is not necessarily attended with a co-extensive 
increase of the demand for money. The business of circulation is 
extended; but the agent of circulation becomes more active and 
efficient. 

2. In a state of national opulence, ci*edit is a more frequent sub- 
stitute for money. In Chap. XXII, of the preceding book, it has 
been shown, how a portion of the national money may be dispensed 
with by the employment of convertible paper, without any resulting 
inconvenience.! By this expedient, the use of metal money, and, 
consequently, the demand for silver for the purposes of money, is 
considerably diminished. Nor is convertible paper the sole expe- 

* In a poor country, after a dealer has disposed of his wares, he is sometimes 
a long while before he can provide himself with the returns he has in view; and, 
during the interval, the money-proceeds remain idle in his hands. Moreover, 
in a poor country, the investment of money is always difficult. Savings are 
slow and gradual, and are seldom turned to profitable account, until after a lapse 
of many years; so that a great deal of money is always lying by in a state of 
inaction. 

f Ricardo, whom I look upon as the individual in Europe the best acquainted 
with the subject of money, both in theory and in practice, has shown, in his 
Proposal for an economical and secure Currency, that, when the good government 
of the state may be safely reckoned upon, paper may be substituted for the 
whole of a metallic money; and a material possessed of no intrinsic value, by 



316 ON DISTRIBUTION. book ii. 

dient of substitution amongst an industrious and commercial people; 
every kind of private obligations and covenants, as well as sales on 
credit, transfers of money-credit, and even mer^ debtor and creditor 
accounts current, have an effect precisely analagous. 

Thus the necessity, and consequently the demand, for metal mo- 
ney never advances in equal ratio with the progressive multiplica- 
tion of other products; and it may be truly said, that the richer a 
nation is, the smaller is the amount of its coin, in comparison with 
other nations. 

Were the quantum of the supply alone to determine the exchange- 
able value of a commodity, silver would stand to gold in the ratio of 
1 to 45; for silver and gold are produced by metallurgy as 45 to 1.* 
But the demand for silver is greater than for gold; its uses are both 
far more general and far more various; and thus its relative value is 
prevented from falling lower than 1 to 15. 

A portion of the demand for the precious metals is occasioned by 
their gradual destruction by use; for, although less subject to decay 
than most products, they are still perishable in a certain degree; and 
doubtless the wear, though slow, must be considerable upon the im- 
mense quantity of gold and silver in constant use, as well in the 
character of money, as in the various objects of spoons, forks, gob- 
lets, dishes, and jewellery of all sorts. There is likewise a large 
consumption in plating and gilding. Smith asserts, that the manu- 
facturers of Birmingham alone, in his time, worked up annually, as 
much as the worth of 50,000A in these ways.t A further allowance 

skilful management, be made to supplant a dear and cumbrous one, whose me- 
tallic properties are never called into play by the functions of money. 

* Humboldt. Essai Pol. sur la Nouvellt E&pagne, 8v« tom. iv. p. 222. 

t Wealth of Nations, book i. c. 11. The manufacturing consumption of Bir- 
mingham and other towns has greatly increased since the date of that work. (1) 

(1) Mr. Jacobs, in his work on the precious metals, to which we have already 
had occasion to refer, has shed much light on the consumption, as well as on 
the production, of gold and silver, both before and since the discovery of the 
American continent. His twenty-sixth chapter is devoted to an inquiry into the 
consuinption of the precious metals from 1810 to 1830. This chapter abounds 
with highly instructive and curious details, which it would be here impossible 
to present, but which furnish the grounds of the following statements, also taken 
from the same chapter, and which fully demonstrate the great increase in the 
consumption of gold and silver, in what our author, in this note, calls "the 
manufacturing consumption," since the date of Dr. Adam Smith's work on the 
Wealth of Nations, to which he refers. 

According, then, to Mr. Jacobs, the annual consumption of the precious 
metals, from 1810 to 1830, in their application to ornamental and luxurious pur- 
poses, he estimates as follows: 

In Great Britain, . . . 2,457,221/. 

France, ...... 1,200,000 . 

Switzerland, . . . 350,000 

Therest of Europe, . 1,605,490 

America, 280,630 



Making the whole amount, . . 5,893,341/. equal to 28,288,036 dollars. 

Aaierican Editor. 



CHAP. IV. ON DISTRIBUTION. 317 

must be made for the consumption of embroidery, tissue, book-bind- 
ing, &c., all which moy be set down as finally lost to other purposes. 
Add to this the buried hoards, the knowledge of which dies with 
the possessor, and the quantity lost by shipwreck. 

If the nations of the world go on increasing their wealth, as most 
of them certainly have done for the last three centuries, their want 
of the precious metals will progressively advance, as well in conse- 
quence of the gradual wear, which will be greater in proportion to 
their increasing use, as of the multiplication and increased aggregate 
value of other commodities, which will create a larger demand for 
the purposes of transfer and circulation. If the produce of the 
mines do not keep pace with the increasing demand, the precious 
metals will rise in value, and less of them be given in exchange for 
other products in general. If the progress of mining shall keep 
pace with the advances of human industry, their value will remain 
stationary, as it seems to have done for the last two centuries; during 
which the demand and supply have regularly advanced together.* 

* We are assured by Humboldt, that the produce of the mines of Mexico has, 
in the last 100 years, been increased in the ratio of 110 to 25; also, that such is 
the abundance of silver ore, in the chain of the Andes, that, reckoning- the num- 
ber of veins either worked superficially, or not worked at all, one would be led 
to imagine, that Europe has hitherto had a meresample of their incalculable 
stores. Essai Pul. sur la JV. Espagne, 8vo. torn. iv. p. 149. 

The very slight and gradual depreciation of gold and silver, effected by their 
immense and increasing annual supply, is one amongst many proofs of the rapid 
and general advance of human wealth, whereby the demand is made to keep 
pace with the supply. Yet I am inclined to think, that their value after remain- 
ing nearly stationary for a century, has within the last thirty years begun again 
to decline. The sdier of wheat, Paris measure, which was for a long time, on 
an average sold for 4 oz. of silver, has now risen to 4 1-2 oz., and rents are 
raised upon every renewal of lease. All other things seems to be rising in the 
like proportion: which indicates, that silver is undergoing a depreciation of rela- 
tive value.(l) 



(1) In a former note, we referred to the great decline, since the year 1809, in 
the productiveness of the whole mines, both in this and in the eastern continent, 
on the authorities which Mr. Jacobs has given, in his learned work on the pre- 
cious metals. From the same work, we htre extract his concluding observations 
of the twenty-sixth chapter, in relation to the stock of coin now in existence, 
by which it will appear, that during the twenty years, from 1810 to 1830, 
the diminution of gold and silver coin amounted to nearly one-sixth part of the 
whole stock. 

" We have estimated," says Mr. Jacobs, " the stock of coin in existence at 
the end of tiie year 1809 to have been 380 million pounds; and the additions 
made to it between that period and of the year 1829, at the rate of 5,186,800 
pounds annually, would make it 103,736,000 pounds. 
From the 380,000,000 of coin left in 1809, we deduct for loss 
by abrasion, at the rate of 1 part in 400 in each year, which 
in the 20 years would amount to 18,095,220/., thus leaving 

in 1829, 361,904,780/. 

To which may be added the supply from the mines, . . 103,73tj,000 

Thus showing, .• 465,640,780/. 



318 ON DISTRIBUTION. bookii. 

And, if the supply of those metals outrun the progress of general 
wealth, as it seems to be doing at this moment, they will fall in re- 
spect to other commodities at large. Metal-money will thereby be 
rendered more cumbrous; but the other uses of gold and silver will 
be more widely diffused. 

It would be a long and tedious task to expose all the false reason- 
ing and erroneous views, originating in the perpetual confusion of 
the different kinds of variation, that it has cost so much time to ana- 
lyze and distinguish. It is enough to put the reader into a condition 
himself to discover their fallacy, and estimate the tendency of mea- 
sures avowedly directed to influence public wealth, by operating 
upon the scale of value. 



CHAPTER V. 

OF THE MANNER IN WHICH REVENUE IS DISTRIBUTED AMONGST 

SOCIETY. 

The causes, which determine the value of things, and which ope- 
rate in the way described in the preceding chapters, apply without 
exception to all things possessed of value, however perishable; 
amongst others, therefore, to the productive service yielded by in- 
dustry, capital, and land, in a state of productive activity. Those, 
who have had at their disposal any one of these three sources of 

From which must be deducted that converted 

into utensils and ornaments, . . 5,612,611 
And that transferred to Asia, . . 2,000,000 



7,612,611 annually. 
Or in twenty years, . . r52,252,220 



This would show the estimated amount at the end of 1829 to be, 313,388,560/. 

Or less than at the end of 1809, 66,611,440/. 

Or a diminution of nearly one-sixth part in the twenty years." 

" During the period we have been considering, and indeed for many years 
before, the comparative value of gold to silver had scarcely experienced any 
alteration. According to the view here taken, the amount of gold applied to 
purposes of luxury had far exceeded that of silver, perhaps in the proportion of 
four to one; but, on the other hand,.the treasure transferred to India and China 
had consisted chiefly of silver, and much more gold had been brought to Europe 
from those countries than had been conveyed to them. It has before (twenty- 
fifth chapter of this inquiry) been attempted to be shown that the durability of 
gold in coin is in the proportion of four to one greater than that of silver. It 
has, too, been shown that the recently increased produce of the mines of Russia 
has consisted chiefly of gold. These circumstances, on which our limits do not 
admit of enlargement, might be shown to be sufficient to account for the equable 
rate of value which has been preserved between the two metals during a long 
period." American Editor. 



CHAp.v. ON DISTRIBUTION. 319 

production, are the venders of what we shall here denominate pro- 
ductive agency; and the consumers of its product are the purchasers. 
Its relative value, like that of every other commodity, rises in direct 
ratio to the demand, and inverse ratio to the supply. 

The wholesale employers of industry, or adventurers, as they 
have been called, are but a kind of brokers between the venders and 
the purchasers, who engage a quantum of productive agency upon a 
particular product, proportionate to the demand for that product.* 
The farmer, the manufacturer, the merchant, is constantly occupied 
in comparing the price, which the consumer of a given product will 
and can give for it, with the necessary charges of its production; if 
that comparison determine him to produce it, he is the organ of a 
demand for all the productive agency applicable to this object, and 
thus furnishes one of the bases of the value of that agency. 

On the other hand, the agents of production, animate and inani- 
mate, land, capital, and human labour, are supplied in larger or 
srnaller quantity, according to the action of the various motives, that 
will be detailed in the succeeding chapters; thus forming the other 
bases of the value at which their agency is rated. t 

Every product, when completed, repays by its value the whole 
amount of productive agency employed in its completion. A great 
part of this agency has been paid for before the entire completion of 
the product, and must have been advanced by somebody: other part 
has been remunerated on its completion; but the whole is always 
paid for ultimately out of the value of the product. 

By way of exemplifying the mode, in which the value of a pro- 
duct is distributed amongst all that have concurred in its produc- 
tion, let us take a watch, and trace from the commencement, the 
manner in which its smallest parts have been procured, and m which 
their value has been paid to every one of the infinite number of 
concurring producers. 

In the first place we find, that the gold, copper, and steel, used in 
its construction, have been purchased of the miner, who has received 
in exchange for these products, the wages of labour, interest of capi- 
tal, and rent paid to the landed proprietor. 

The dealers in metal, who buy of the original producer, re-sell to 
those engaged in watchmaking, and are thus reimbursed their ad- 
vance, and paid the profits of their business into the bargain. 

* It has been already seen, that the demand for every 'product is great, in 
proportion to the degree of its utility, and to the quantity of other products pos- 
sessed by others, and capable of being given in exchange. In other words, the 
utility of an object, and the wealth of the purchasers, jointly determine the extent 
of the demand. 

f In digesting the plan of this work, I hesitated for a long time, whether or 
no to place the analysis of value before that of production; to explain the nature 
of the quality produced, before entering upon the investigation of the mode of 
its production. But it appeared to me, that to make the foundation of value 
intelligible, it was necessary to have a previous knowledge of wherein the cost 
of production consists; and for that purpose to have a just and enlarged concep- 
tion of the agents of production, and of the service they are capable of yielding. 



320 ON DISTRIBUTION. bookii. 

The ref3pective mechanics, who fashion the different parts whereof 
a watch is composed, sell them to the watchmaker, who, in paying 
them, refunds the advance of their previous value, together with the 
interest upon that advance; and pays, besides, the wages of labour 
hitherto incurred. This very complex operation of payment may 
be effected by a single sum, equal to the aggregate of those united 
values. In the same way, the watchmaker deals with the me- 
chanics that furnish the dial plate, the glass, &c., and such ornaments 
as he may think fit to add, — diamonds, enamel, or any thing he 
pleases. 

Last of all, the individual purchaser of the watch for his own use 
refunds to the watchmaker the whole of his advances, together with 
interest on each part respectively, and pays him besides, a profit on 
his personal skill and industry. 

We find, then, that the total value of the watch has been shared 
amongst all its producers, perhaps long before it was finished; and 
those producers are much more numerous than I have described or 
than is generally imagined. Among them, probably, may be found 
the unconscious purchaser himself, who has bought the watch, and 
wears it in his fob. For who knows but he may have advanced his 
own capital to a mining adventurer, or a dealer in metal; or to the 
director of a large factory; or to an individual who acts himself in 
none of these capacities, but has vmderlent to one or more such per- 
sons a part of the funds he has borrowed at interest from the identi- 
cal consumer of the watch? 

It has been observf^d, that it is by no means necessary for a pro- 
duct to be jDerfected for use, before the majority of its concurring 
producers can have been reimbursed that portion of value they have 
contributed to its completion; in a great many cases, these producers 
have even consumed their equivalent long before the product has 
arrived at perfection. Each successive producer makes the advance 
to his precursor of the then value of the product, including the 
labour ah'eady expended upon it. His successor in the order of 
production, reimburses him in turn, with the addition of such value 
as the product may have received in passing through his hands. 
Finally, the last producer, who is generally the retail dealer is com- 
pensated by the consumer for the aggregate of all these advances, 
plus the concluding operation performed by himself upon the 
product. 

The whole revenues of the community are distributed in one and 
the same manner. 

That portion of the value produced, which accrues in this manner 
to the landed proprietor, is called \}a& profit of land; which is some- 
times transferred to the farmer, in consideration of a fixed rent. 

The portion assigned to tlie capitalist, or person making the ad- 
vances, however minute and for however short a period of time, is 
called the profit of capital; which capital is sometimes lent, and 
the profit relinquished on condition of a stipulated interest. 

The portion assigned to the mere mechanic or labourer is called 



CHAP.v. ON DISTRIBUTION. 



321 



the profit of labour; which is sometimes relinquished for certain 
wages.* 

Thus, each class receives its respective share of the total value 
produced; and this share composes its revenue. Some classes re- 
ceive their share piecemeal, and consume as fast as they receive it- 
and these are the most numerous, for they comprise most of the 
labouring classes. The land-holder and the capitalist, who do not 
themselves turn their means to account, receive their revenue period- 
ically, once or twice, or perhaps four times a year, according to the 
terms of the contract with the transferee. But, in whatever manner 
a revenue may be derived, it is always analogous in its nature, and 
must originate in actual value produced. Whatever value an indi- 
vidual receives in satisfaction of his wants, without having either 
directly or indirectly concurred in production of some kind or other, 
must be wholly either a gratuitous gift or a spoliation: there is no 
other alternative. 

It is in this way, that the total value of products is distributed 
amongst the members of the community; I say, the total value, 
because such part of the whole value produced, as does not go to one 
of the concurring producers, is received by the rest. The clothier 
buys wool of the farmer, pays his workmen in every department, 
and sells the cloth, the result of their united exertion, at a price that 
reimburses all his advances, and affords himself a profit. He never 
reckons as profit, or as the revenue of his own industry, any thing 
more than the net surplus, after deducting all charges and outgoing; 
but those outgoings are merely an advance of their respective reve- 
nues to the previous producers, which are refunded by the gross 
value of the cloth. The price paid to the farmer for his wool, is the 
compound of the several revenues of the cultivator, the shepherd, 
and the landlord. Although the farmer reckons as net produce only 
the surplus remaining after payment of his landlord and his servants 
in husbandry, yet to them these payments are items of revenue, — 
rent to the one and wages to the other; to the one, the revenue of 
his land, to the other, the revenue of his industry. The aggregate 
of all these is defrayed out of the value of the cloth, the wholet of 
which forms the revenue of some one or other, and is entirely ab- 
sorbed in that way. 

* In the above instance of the watch, many of the artisans are themselves the 
adventurers in respect to their own industry; in which case their receipts are 
profits, not wages. If the maker exclusively of the chain himself, buys the 
steel in its rude state, works it up, and sells the chain on his own account, he is 
the adventurer in respect to this particular part of the manufacture. A flax- 
spinner buys a few penny-worth of flax, spins it, and converts her thread into 
money. Part of this money goes to the purchase of more flax; this is her cap- 
ital; another portion is spent in satisfying her wants; this is the joint profit of 
her industry, and her little capital, and forms her revenue. 

t Even that portion of the gross value, which is absorbed in the maintenance 
or restoration of the vested capital or machinery. If his works need repairs, 
which are executed by the proper mechanic, the sum expended in them forms 
the revenue of that mechanic, and is to the clothier a simple advance, which is 
refunded, like any other, by the value of the product when completed. 
41 



322 ON DISTRIBUTION. book ii. 

Whence it appears, that the term net produce applies only to the 
individual revenue of each separate producer or adventurer in 
industry; but that the aggregate of individual revenue, the total 
revenue of the community, is equal to the gross produce of its land, 
capital, and industry. Which entirely subverts the system of the 
economists of the last century, who considered nothing but the net 
produce of the land as forming revenue, and therefore concluded, 
that this net produce was all that the community had to consume; 
instead of admitting the obvious inference, that the whole of what 
has been created, may also be consumed by mankind.* 

If national revenue consisted of the mere excess of value produced 
above value consumed, this most absurd consequence would be ine- 
vitable, namely, that, where a nation consumes in the year the total 
of its annual product, it will have no revenue whatever. Is a man 
possessed of an income of 2,000 dollars a year to be said to have no 
revenue, because he may think proper to spend the whole of it? 

The whole amount of profit derived by an individual from his 
land, capital, and industry, within the year, is called his annual 
revenue. The aggregate of the revenues of all the individuals, 
whereof a nation consists, is its national revenue.t Its sum is the 
gross value of the national product, minus the portion exported; for 
the relation of one nation, is like that of one individual to another. 
The profits of an individual are limited to the excess of his income 
above his expenditure, which expenditure, indeed, forms the reve- 
nue of other persons, but, if those persons be foreigners, must be 
reckoned in the estimate of the revenue of the respective nations . 
they may belong to. Thus, for instance, when a consignment of 
ribbons is made to Brazil to the amount of 2,000 dollars, and the 
returns received in cotton, in estimating the resulting product to 
France from this act of dealing, the export made to Brazil in pay- 
ment of the cotton must be deducted. Supposing the investment of 
ribbons to procure, say 40 bales of cotton, which, when they reach 
France will fetch 2,400 dollars, 400 dollars only of that sum will 
go to the revenue of France, and the residue to that of Brazil. 

Did all mankind form but one vast nation or community, it would 
be equally true in respect to mankind at large, as to the internal pro- 
duct of each insulated nation, that the whole gross value of the 
product would be revenue. But so long as it shall be necessary to 
consider the human race as split into distinct communities, taking 

* Part of the value created is due to natural agency, amongst which that of 
land is comprised. But, as stated above in Book I., land is treated as a machine 
or instrument, and its appropriator as the producer that sets it in motion; in like 
manner as the productive quality of capital is said to be the productive quality 
of the capitalist to whom it belongs. Mere verbal criticism is of little moment; 
when once the meaning is explained; it is the correctness of the idea, and not of 
the expression, that is material. 

f The term national revenue, has been sometimes incorrectly applied to the 
financial receipts of the state. Individuals, indeed, pay their taxes out of their 
respective revenues; but the sum levied by taxation is not revenue, but rather a 
tax upon revenue, and sometimes unhappily upon capital too. 



CHAP. V. ON DISTRIBUTION. 323 

each an independent interest, this circumstance must be taken into 
the account. Wherefore, a nation, whose imports exceed its ex- 
ports in vahie, gains in revenue to the extent of the excess; which 
excess constitates the profit of its external commerce. A nation 
that should export to the value of 20,000 dollars, and import to the 
value of 24,000 dollars wholly in goods, without any money passing 
on either side, would make a profit of 4000 dollars, in direct contra- 
diction to the theory of the partizans of the balance of trade.* 

The voluminous head of perishable products consumed within the 
year, nay, often at the very moment of production, as in the case of 
all immaterial products, is nevertheless an item of national revenue. 
For what are they but so many values produced and consumed in 
the satisfaction of human wants, which are the sole characteristics of 
revenue? 

The estimation of individual and of national revenue is made in the 
same way, as that of every collection of values, under whatever 
varieties of form ; as of the estate of a deceased person. Each pro- 
duct is successively valued in money or coin. For instance, the 
revenues of France are said to amount to 1,300 millions of dollars; 
which by no means implies, that the commerce of France produces a 
return of that amount in specie. Probably a very small amount of 
specie, or none at all, may have been imported. All that is meant 
by the assertion is, that the aggregate annual products of the nation, 
valued separately and successively in silver coin, make the total 
value above stated. The only reason of making the estimate in 
money is, the greater facility acquired by habit of forming an idea 
of the unchangeable value of a specific amount of money, than of 
other commodities. Were it not for that facility, it would be quite 
as well to make the estimate in corn; and to say, that the revenues 
of France amounted to 1,300,000 bushels of wheat, which at one dol- 
lar the bushel, would make precisely the same amount. 

Money facilitates the circulation from hand to hand of the values 
composing both revenue and capital; but is itself not an item of 
annual revenue, not being an annual product, but a product of 
previous commerce or metallurgy, of a date more or less remote. 

The same coin has effected the circulation of the former year, 
possibly of the former century, and has all the while remained the 
same in amount; nay, if the value of its material have declined in 
the interim, the nation will even have lost upon its capital existing 
under the form of money; just in the same way as a merchant 
would lose upon the fall of price of the goods in his warehouses. 

Thus, although the greater part of revenue, that is to say, of value 
produced, is momentarily resolved into money, the money, the 
quantity of silver coin itself, is not what constitutes revenue; reve- 
nue is value produced, wherewith that quantity of silver coin has 

* Their profit arises from increase of value effected by the transport upon 
both the export and the import, by the time they have reached their destination 
respectively. 



324 ON DISTRIBUTION. bookii. 

been bought; and, as that value assumes the form of money but for 
a moment, the same identical pieces of money are made use of many 
times in the course of a year, for the purpose of paying or receiving 
specific portions of revenue. Indeed, some portions of revenue 
never assume the form of money at all. The manufacturer, that 
boards his workmen himself, pays part of their wages in food; so 
that this far greater portion of the mechanic's revenue is paid, 
received, and consumed, without having once taken the shape of 
money, even for an instant. In the United States of America, and 
in countries similarly circumstanced, it is not uncommon for the 
colonist to derive from the produce of his own estate, food, lodging, 
and raiment for the whole of his establishment; receiving and con- 
suming his whole revenue in kind, without any intervention of 
money whatsoever. 

I think I have said enough to warn the reader against confound- 
ing the money, into which revenue may be converted, with revenue 
itself; and to establish a conviction that the revenue of an indivi- 
dual, or of a nation, is not composed of the money received in lieu 
of the products of his or their creation, but is the actual product or 
its value, which, by a process of exchange, may undoubtedly arrive 
at its destination in the shape of a bag of crown pieces, or in any 
other shape whatsoever. 

No value, whether received in the shape of money or otherwise, 
can form a portion of annual revenue, unless it be the product, or 
the price of a product, created within the year: all else is capital, — 
is property passing from one hand to another, either in exchange, as 
a gift, or by inheritance. For an item of capital, or one of revenue, 
may be transferred or paid any how, whether in the shape of per- 
sonal or real, of moveable or immoveable property, or of money. 
But, no matter what shape it assume, revenue differs from capital 
essentially in this, that it is the result or product of a pre-existing 
source, whether land, capital, or industry. 

It has with some been a matter of doubt, whether the same value, 
which has already been received by one individual as the profit or 
revenue of his land, capital, or industry, can constitute the revenue 
of a second. For instance, a man receives 100 crowns in part of 
his personal revenue, and lays it out in books; can this item of 
revenue, thus converted into books, and in that shape destined to his 
consumption, further contribute to form the revenue of the printer, 
bookseller, and all the other concurring agents in the production of 
the books, and be by them consumed a second time? The difficulty 
may be solved thus. The value forming the revenue of the first 
individual, derived from his land, capital, or industry, and by him 
consumed in the shape of books, was not originally produced in that 
form. There has been a double production: 1. Of corn perhaps by 
the land and the industry of the farmer, which has been converted 
into crown pieces, and paid as rent to the proprietor: 2. Of books by 
the capital and industry of the bookseller. The two products have 
been subsequently interchanged one for the other, and consumed 



CHAP. VI. ON DISTRIBUTION. 



325 



each by the producer of the other: having arrived at the particular 
lorm adapted to their respective wants. 

So likewise of immaterial products. The opinion of the lawyer, 
the advice of the physician, is the product of their respective talents 
and knowledge, which are their peculiar productive means. If the 
merchant have occasion to purchase their assistance, he gives for it a 
commercial product of his own converted into money. Each of 
them ultimately consumes his own revenue respectively, transformed 
into the object best adapted to his peculiar occasions. 



CHAPTER VI. 

OP WHAT BRANCHES OP PRODUCTION YIELD THE MOST LIBERAL 

RECOMPENSE TO PRODUCTIVE AGENCY. v 

The aggregate value of a product, in the way just described, 
refunds to its different concurring producers the amount of their 
advances, with the addition in most cases, of a profit, that constitutes 
their revenue. But the profits of productive agency are not of equal ^ 
amount in all its branches; some yielding but a very scanty revenue ' 
lor the land, capital, or industry, embarked in them; while others 
give an exorbitant return. 

True it is, that productive agents always endeavour to direct their 
agency to those employments, in which the profits are the greatest and 
thus, by their competition have as much tendency to lower price as 
demand has to raise it; but the effects of competition can not always '■ 
so nicely proportion the supply to the demand, as in every case to ' 
ensure an equal remuneration. Some kinds of labour are scantily ' 
supplied, in countries where people are not accustomed to them- and 
capital IS often so sunk in a particular channel of production that it 
can never be transferred to any other from that wherein 'it was 
originally embarked. Besides, the land may stubbornly resist that 
kind ol cultivation, whose products are in the greatest demand 

One cannot trace the fluctuation of profit on each particular occa- 
sion. A wonderful change may be effected by a new invention, a 
hostile invasion, or a siege. Such partial circumstances may influence 
or derange the operation of general causes, but can not destroy their 
general tendency. No dissertation, however voluminous, could be 
made to embrace every individual circumstance, that, by possibility 
may influence the relative value of objects; but one may specify 
general causes, and such as have an uniform activity; thereby 
. enabling every one, when the particular occasion may present itself, 
to estimate the effect produced by the operation of partial and tran- 
sient circumstances. 



326 ON DISTRIBUTION. book ii. 

It may appear extraordinary at first sight, but will on inquiry be 
found generally true, that the largest profit is made, not on the 
dearest commodities or upon those which are least indispensable, but 
rather on those, which are the most common and least to be dis- 
pensed with. In fact, the demand for these latter is necessarily per- 
manent; for it is stimulated by actual want, and grows with every 
increase of the means of production; inasmuch as nothing tends to 
increase population more, than providing the means of its subsistence. 
The demand for superfluities, on the contrary, does not expand with 
the increased power of producing them. An extraordinary run, 
which, by the way, can never take place but in large towns, may 
raise the current considerably above the natural price; that is to 
say, above the actual cost of production; or a change of fashion 
may again depress it infinitely below that point. Superfluities 
are, after all, but objects of secondary want even to the rich 
themselves; and the demand for them is limited to the very 
small number of persons that can indulge in them. When a 
casual calamity obliges individuals to reduce their expenditure, 
when their revenues are curtailed by the ravages of war, by taxation, 
or by natural scarcity, the first items of retrenchment are always the 
articles of least necessary consumption. And this may serve, per- 
haps, to explain, why the productive agency directed to the raising 
of superfluities, is generally worse paid than that otherwise employed. 

I say generally, for it is possible enough that, in a great metropolis, 
where the demand for luxuries is more urgent than elsewhere, and 
the dictates of fashion, however absurd, more implicitly obeyed than 
the external laws of nature; where a man will, perhaps, be content 
to lose his dinner, so he may appear in the evening circle in embroi- 
dered ruffles, it is possible, that in such a place the price of the gew- 
gaws, may sometimes very liberally reward the labour and capital 
devoted to their production. But, except in such particular cases, 
balancing one year's profits with another, and allowing for contin- 
gent losses, and it has been ascertained, that the adventurers in the 
production of superfluities make the most scanty profits, and that 
their workmen are the worst paid. The manufacturers of the finest 
laces in Normandy and Flanders are a very indigent set of people; 
and at Lyons, the workers of gold-embroidery are absolutely clothed 
in rags. Not but that very considerable profits have occasionally 
been derived from such articles. A hat-maker has been known to 
make a fortune by a fancy hat; but, taking all the profits made on 
superfluities, and deducting the value of goods remaining unsold, or, 
though sold, never paid for, we shall find that this class of products 
affords, on the whole, the scantiest profit. The most fashionable 
tradesmen are oftenest in the list of bankrupts. 

Commodities of general use are attainable by a greater number of 
persons, and are in demand with almost every class of society. The 
chandelier is to be found only in the mansions of the rich; but the 
meanest cottage is furnished with the convenience of a candlestick: 



CHAP. VI. ON DISTRIBUTION. 327 

the demand for candlesticks is, therefore, regular, and always more 
brisk than that for chandeliers; and, even in the most opulent coun- 
try, the total value of the candlesticks is far greater than that of the 
chandeliers. 

The articles of human food are unquestionably those of most 
indispensable use; the demand for them recurs daily; and no occu- 
pations are so regular as those which minister to human sustenance. 
Wherelor^ it is they that yield the most certain profit, notwithstand- 
ing the eifects of brisk competition.* The butchers, bakers, and 
porkmen of Pans, are pretty sure to retire with a fortune sooner or 

Iw L ^ail I ^ ^^^^ '^ ^""^^ P^'^^^y g°°^ authority in such matters, 
tnat ha i the houses and real property sold in Paris and the environs, 
is bought up by tradesmen in those lines. 

It IS on this account, that individuals and nations, who understand 
their true interest, unless they have very cogent reasons for acting 
otherwise, apply themselves in preference to the production of what 
tradesmen call current articles. Mr. Eden, who, in I7O6, negotiated 
on the part of Great Britain the treaty of commerce concluded by 
M. de Vergennes, went upon this principle, in stipulating the free 
import of the common English earthenware into France. « The few 
dozens of plates we may sell you," said the English agent, « will be 
a poor set-off against the magnificent services of Sevres porcelain we 
shall take of you." This appeal to the vanity of the French agent 
was decisive. But, as soon as the English earthenware was admit- 
ted. Its lightness, cheapness, convenience and simplicity of form, 
recommended it to the most moderate establishments; its regular 
import, in a short time, amounted to many millions, and continued 
increasing every year until the war. The exportation of Sevres 
china, was a mere trifle in comparison. 

The scale for current articles, besides being more considerable, is 
likewise more steady. A tradesman is never long in disposing of 
common linen shirting. r o 

The examples I have selected from the class of manufacture might 
easily be paralleled in the agricultural and commercial branches. A 
much larger value is consumed in lettuces than in pine apples, 
throughout Europe at large; and the superb shawls of Cachemere 
are, in b ranee, a very poor object of trade, in comparison with the 
plain cotton goods of Rouen. 

Wherefore, it is a bad speculation for a nation to aim at the export 
ot objects of luxury, and the import of objects of general utility. 
t ranee supphes Germany with fashions and finery, which very few 
persons can make use of; and Germany makes the return in tapes 

* I speak here of the adventurers, masters, or tradesmen; the mere labourer 
or journeyman benefits only, as it were, by re-action. The farmer, who is an 
adventurer in agriculture, employed in raising products for human sustenance, 
lies under disadvantages, that very much curtail his profits. His concerns are 
too much at the mercy of his landlord, and of the financial exactions of public 
authority, to say nothing of the vicissitudes of seasons, to be very gainful on 



328 ON DISTRIBUTION. . book ii. 

and other merceries, in files, scythes, shovels, tongs, and other hard- 
ware of common use. But for the wines and oils of France, 
the annual product of a soil highly favoured by nature, together with 
a few products of superior execution, France would derive less 
advantage from Germany than Germany from France. The same 
may be said of the French trade with the north of Europe. (a) 



CHAPTER VII. 

OF THE REVENUE OP INDUSTRY. 

Section I. 
Of the Profits of Industry in general. 

The general motives, which stimulate the demand of products, 
have been above investigated.* When the demand for any product 
whatever, is very lively, the productive agency,, through whose 
means alone it is obtainable, is likewise in brisk demand, which 
necessarily raises its ratio of value: this is true generally, of every 
kind of productive agency. Industry, capital, and land, all yield, 
ceteris paribus, the largest profits, when the general demand for 
products is most active, affluence most expanded, profits most widely 
difiused, and production most vigorous and prolific. 

In the preceding chapter, we have seen that the demand for some 
products is always more steady and active than for others. Whence, 
we have inferred, that the agency directed to those particular pro- 
dacts, receives the most ample remuneration. 

Descending in our progress more and more into particular detail, 

* Book I. c. 15. 



(a) The reasoning of this whole chapter is superfluous and inconclusive. 
Where value is left to find its natural level, one class of productive agency 
will, in the long run, be equally recompensed with another, presenting an equi- 
poise of facility or difficulty, of repute or disrepute, of enjoyment or suffering, in 
the general estimation of mankind; this he states fully in the next chapter. If 
our author means here to say merely, that a large class of productive agency will 
receive a larger portion of the general product as its recompense or revenue, or 
that agency in permanent employ will obtain a regular and permanent recom- 
pense, he has taken a very circuitous mode of expressing a position, which is, 
indeed, almost self-evident. The grand division of productive agency is into 
corporeal and intellectual; whereof the former is, on the average, the more amply 
rewarded by the rest of mankind, because the latter, in some measure, rewards 
itself. Thus, the profits of printing and bookselling are, on the whole, more 
liberal than those of authorship; because the latter is partly paid in self-gratifica- 
tion, in vanity, or conscious merit. T. 



CHAP. VII. ON DISTRIBUTION. 329 

we shall examine in this, and some following chapters, in what cases 
the profits of industry bear a greater or a less proportion to those of 
capital and of land, and vice versa; together with the reasons why 
certana ways of employing industry, capital, or land, are more profit- 
able than others. 

To begin then, with the comparison of the relative profits of in- 
dustry, to those of capital and land, we shall find these bear the 
highest ratio, where abundance of capital creates a demand for a 
great mass of industrious agency; as it did in Holland before the 
revolution. Industrious agency was very dearly paid there; as it 
still IS in countries like the United States of America, where popu- 
lation, and consequently, the human agents of production, spite of 
their rapid increase, bear no proportion to the demands of an unli- 
mited extent of land, and of the daily accumulation of capital by the 
prevalence of frugal habits. 

In countries thus circumstanced, the condition of man is generally 
the most comfortable; because those, who live in idleness upon the 
profits of their capital and land, are better able to live on moderate 
profits, than those who live upon the profits of their own industry 
only; the former, besides the resource of living on their capital, can, 
when they please, add the profits of industry to their other revenue; 
but the mere mechanic or labourer can not add at pleasure to the 
profits of his industry those of capital and land, of which he possesses 
none. 

Proceeding next to compare the profits of different branches of 
industrious agency one with another, we shall find them greater or 
less in proportion, 1st, To the degree of danger, trouble, or fatigue, 
attending them, or to their being more or less agreeable; 2dly, To 
the regularity or irregularity of the occupation; 3dly, To the degree 
of skill or talent that may be requisite. 

Every one of these causes tends to diminish the quantity of labour 
in circulation in each department, and consequently to vary its natu- 
ral rate of profit. It is scarcely necessary to cite examples in support 
of propositions so very evident. 

Among the agreeable or disagreeable circumstances attending an 
occupation, must be reckoned the consideration or contempt which 
It entails. Some professions are partly paid in honour. Of any 
given price, the more is paid in this coin, the less may be paid in 
any other, without deducing the ratio of price. Smith remarks, 
that the scholar, the poet, and the philosopher, are almost wholly 
paid in personal consideration, — Whether with reason or from pre- 
judice, this is not entirely the case with the professions of a comic 
actor, a dancer, and innumerable others; they must, therefore, be 
paid in money what they are denied in estimation. " It seems 
absurd at first sight," says Smith, « that we should despise their 
persons, and yet reward their talents with the most profuse liberality. 
Whilst we do the one, however, we must of necessity do the other. 
Should the public opinion or prejudice ever alter with regard to such 
occupations, their jiccuniary recompense would quickly diminish. 
42 



330 ON DISTRIBUTION. bookii. 

More people would apply to them, and the competition would 
quickly reduce the price of their labour. Such talents, though far 
from being common, are by no means so rare as is imagined. Many 
people possess them in great perfection, who disdain to make this 
use of them; and many more are capable of acquiring them, if any 
thing could be honourably made by them,"* 

In some countries, the functions of national administration are 
requited at the same time with high honour and large emolument; 
but it is only so, where, instead of being open to free competition, 
like other occupations and professions, they are in the disposal of 
royal favour. A nation, awake to its true interest, is careful not to 
lavish this double recompense upon official mediocrity; but to 
husband its pecuniary bounty, where it is prodigal of distinction and 
authority. 

Every temporary occupation is dearly paid; for the labourer must 
be indemnified as well for the time he is employed, as for that 
during which he is waiting for employment. A job coachmaster 
must charge inore for the days he is employed, than may appear 
sufficient for his trouble and capital embarked, because the busy 
days must pay for the idle ones; any thing else would be ruin to 
him. The hire of masquerade dresses is expensive for the same 
reason; the receipts of the carnival must pay for the whole year. 
Upon a cross road, an innkeeper must charge high for indifferent 
entertainment; for he may be some days before the arrival of 
another traveller. 

However, the proneness of mankind to expect, that, if there be 
a single lucky chance, it will be sure to fall to their peculiar lot, 
attracts towards particular channels a portion of industry dispropor- 
tionate to the profit they hold out. ' In a perfectly fair lottery,' 
says the author of the Wealth of Nations, 'those who draw prizes 
ought to gain all that is lost by those who draw blanks. In a pro- 
fession, where twenty fail for one that succeeds, that one ought to 
gain all that should have been gained by the unsuccessful twenty.'! 
Now many occupations are far from being paid according to this 
rate. The same author states his belief, that, how extravagant 
soever the fees of counsellors at law of celebrity may appear, the 
annual gains of all the counsellors of a large town bear but a very 
small proportion to their annual expense; so that this profession, 
must, in great part, derive its subsistence from some other indepen- 
dent source of revenue. 

It is hardly necessary to state, that these several causes of differ- 
ence in the ratio of profit may act all in the same, or each in an 
opposite direction; or that, in the former case, the effect is more 
intense; whereas, in the latter, the opposite action of one controls 
and neutralizes the other. It would be a waste of time to prove, 
that the agreeable circumstances of a profession may balance the 
uncertainty of its product: or that a business that does not furnish 

* Wealth of Nations, book i. c. 10. 
t Wealth of Nations, book i. c. 10. 



CHAP. VII. ON DISTRIBUTION. ^31 

constant occupation, and is moreover attended with danger, must be 
indemnified by a double increase of salary. 

The last, and perhaps the principal cause of inequality in the pro- 
fits of industry in general is, the degree of skill it ma}' require. 

When the skill requisite to any calling, whether of a superior 
or subordinate character, is attainable only by long and expensive 
training, that training must every year have involved a certain 
expense, and the total outlay forms an accumulated capital. In such 
case, its remuneration includes, over and above the wages of labour, 
an interest upon the capital advanced in the training, and an interest 
higher than the ordinary rate; for the capital advanced has been 
actually sunk, and exists no longer than the life of the individual. It 
should, therefore, be calculated as an annuity.* 

It is for this reason, that all employments of time and talents, 
which require a liberal education, are better paid than those, which 
require less education. Education is capital which ought to yield 
interest, independent of the ordinary profits of industry. 

There are facts, it is true, that militate against this principle; but 
they are capable of explanation. The priesthood is sometimes very 
ill paid;t yet a religion, founded upon very complicated doctrines, 
and obscure historical facts, requires in its ministers a long course of 
study and probation, and such study and probation necessarily call 
for an advance of capital; it would seem requisite, therefore, for the 
continued existence of the clerical profession, that the salary of the 
minister should pay the interest on the capital expended, as well as 
the wages of his personal trouble, which the profits of the inferior 
clergy rarely exceed, particularly in catholic countries. It must, 
however, be ascertained, whether the public have not themselves 
advanced this capital in the maintenance and education of clerical 
students at the public charge; in which case, the public advancing 
the capital, may find people enough to execute the duties for the 
mere wages of their labour, or a bare subsistence, especially where 
there is no family to be provided for. 

* Nay, even more than annuity interest on the sums spent in the education of 
the person who receives the salary; strictly speaking, it should be annuity inter- 
est upon the total sum devoted to the same class of study, whether it have or 
have not been made productive in its kind. Thus the aggregate of the fees of a 
physician ought to replace not only what has been spent in their studies, but, 
ia addition, all the sums expended in the instruction of the students, who may 
have died during their education, or whose success may not have repaid the 
care bestowed upon them: for the stock of medical industry in actual existence 
could never have been reared, without the loss of some part of the outlay devoted 
to medical instruction. However, there is little use in too minute attention to 
accuracy in the estimates of political economy, which are frequently found at 
variance with fact, on account of the influence of moral considerations in the 
matter of national wealth, an influence that does not admit of mathematical esti- 
mation. The forms of algebra are therefore inapplicable to this science, and 
serve only to introduce unnecessary perplexity. Smith hus not once had recourse 
to them. 

j" I do not mean to include the superior orders of the clergy, whose benefices 
are extremely rich and well paid, though upon principles of state policy. 



332 ON DISTRIBUTION. book ii. 

When, besides expensive training, peculiar natural talent is 
required for a particular branch of industry, the supply is still more 
limited in proportion to the demand, and must consequently be bet- 
ter paid. A great nation will probably contain but two or three 
artists capable of painting a superior picture, or modelling a beau- 
tiful statue; if such objects, then, be much in demand, those few can 
charge almost what they please; and, though much of the profit is 
but the return with interest of capital advanced in the acquisition of 
their art, yet the profits it brings leaves a very large surplus.(a) A 
celebrated painter, advocate, or physician, will have spent, of his 
own or relation's money, six or eight thousand dollars at most, in 
acquiring the ability from which his gains are derived; the interest 
of this sum calculated as an annuity, is but 800 dollars; so that, if he 
make 6000 dollars by his art, there remains an annual sum of 3000 
dollars, which is wholly the salary of his skill and industry. If 
every thing affording revenue is to be set down as property, his for- 
tune at ten years' purchase may be reckoned 50,000 dollars, even 
supposing him not to have inherited a sol. 

Section II. 
Of the Profits of the Man of Science. 

The philosopher, the man who makes it his study to direct the 
laws of nature to the greatest possible benefit of mankind, receives 
a very small proportion of the products of that industry, which 
derives such prodigious advantage from the knowledge, whereof he 
■ is at the same time the depository and the promoter. The cause of 
his disproportionate payment seems to be, that, to speak technically, 
he throws into circulation, in a moment, an immense stock of his 
product, which is one that suffers very little by wear; so that it is 
long before operative industry is obliged to resort to him for a fresh 
supply. . 

The scientific acquirements, without which abundance of manu- 
facturing processes could never have been executed, are probably 
the result of long study, intense reflection, and a course of experi- 
ments equally ingenious and delicate, that are the joint occupation 
of the highest degree of chemical, medical, and mathematical skill. 
But the knowledge, acquired with so much difiiculty, is probably 
transmissible in a few pages; and, through the channel of public lee- 



(a) From which, however, is to be deducted the average loss on the ffeneral 
balance of less successful competitors in the same line. It does not tppear, 
that, in J^ngland at least, any allowance is to be made for personal consideration. 
Which IS seldom attached in a high ratio even to the greatest excellence in the 
department of pure art. There is no instance of a sculptor or a painter arriving 
at the honours of the peerage, which have been placed within the reach of sue- 
cessful commercial enterprise. T. 



CHAP. VII. ON DISTRIBUTION.. 



333 



tures, or of the press, is circulated in much greater abundance, than 
IS required for consumption; or, rather, it spreads of itself, and, 
being imperishable, there is never any necessity to recur to those 
irom whom it originally emanated. ' 

Thus, according to the natural laws, whereby the price of things 
IS determined, this superior class of knowledge will be very ill paid • 
that IS to say, it will receive a very inadequate portion of the value 
ol the product, to which it has contributed. It is from a sense of 
this injustice, that every nation, sufficiently enlightened to conceive 
the immense benefit of scientific pursuits, has endeavoured, by spe- 
cial tayours and flattering distinctions, to indemnify the man of sci- 
ence, for the very trifling profit derivable from his professional occu- 
pations, and from the exertion of his natural or acquired faculties 

Sometimes a manufacturer discovers a process, calculated either 
to introduce a new product, to increase the beauty of an old one, or 
to produce with greater economy; and, by observance of strict 
secrecy, may make for many years, for his whole life perhaps, or 
even bequeath to his children, profits exceeding the ordinary ratio of 
his calling. In this particular case the manufacturer combines two 
ditterent operations of industry: that of the man of science, whose 
profit he engrosses himself, and that of the adventurer too. But few 
such discoveries can long remain secret; which is a fortunate cir- 
cumstance for the public, because this secrecy keeps the price of the 
particular product it applies to above, and the number of con- 
sumers enabled to enjoy it below, the natural level.* 

It IS obvious, that I am speaking only of the revenue a man of 
science derives from his calling. There is nothing to prevent his 
being at the same time a landed proprietor, capitalist or adventurer, 
and possessed of other revenue in these different capacities. 

Section III. 
Of the Profits of the Master-agent, or Adventurer, in Industry. 

We shall, in this section, consider only that portion of the profits 
ot the master-agent, or adventurer, which may be 'considered as the 
recompense of that peculiar character. If a master-manufacturer 
have a share in the capital embarked in his concern, he must be 
ranked ;?ro tanto in the class of capitalists, and the benefits thence 
derived be set down as part of the profits of the capital so em- 
barked.t 

* Such of my readers as may imagine, that the sum of the production of a 
country is greater, when the scale of price is unnaturally high, are requested to 
refer to what has been said on the subject, suprh. Chap. 3, Sf this Book. 

r bmith IS greatly embarrassed by his neglect of the distinction between the 
profits of superintendency, and those of capital. He confounds them under the 
general head of profits of stock; and all his sagacity and acuteness have scarcely 
been sufficient to expound the causes, which influence their fluctuations. Wealth 



334 • ON DISTRIBUTION. book ii. 

It very seldom happens, that the party engaged in the manage- 
ment of any undertaking, is not at the same time in the receipt of 
interest upon some capital of his own. The manager of a concern 
rarely borrows from strangers the whole of the capital employed. 
If he have but purchased some of the implements with his own capi- 
tal, or made advances from his own funds, he will then be entitled 
to one portion of his revenue in quality of manager, and another in 
that of capitalist. Mankind are so little inclined to sacrifice any par- 
ticle of their self-interest, that even those, who have never analyzed 
these respective rights, know well enough how to enforce them to 
their full extent in practice. 

Our present concern is, to distinguish the portion of revenue, 
which the adventurer receives as adventurer. We shall see by- 
and-by, what he, or somebody else, derives in the character of 
capitalist. 

It may be remembered, that the occupation of adventurer is com- 
prised in the second class of operations specified as necessary for the 
setting in motion of every class of industry whatever; that is to say, 
the application of acquired knowledge to the creation of a product 
for human consumption.* It will likewise be recollected, that such 
application is equally necessary in agricultural, manufacturing, and 
commercial industry; that the labour of the farmer or cultivator on 
his own account, of the master-manufacturer and of the merchant, all 
come under this description; they are the adventurers in each de- 
partment of industry respectively. The nature of the profits of 
these three classes of men, is what we are now about to consider. 

The price of their labour is regulated, like that of all other objects, 
by the ratio of the supply, or quantity of that labour thrown into 
circulation, to the demand or desire for it. There are two principal 
causes operating to limit the supply, which, consequently, maintain 
at a high rate the price of this superior kind of labour. 

It is commonly requisite for the adventurer himself to provide the 
necessary funds. Not that he must be already rich; for he may 
work upon borrowed capital; but he must at least be solvent, and 
have the reputation of intelligence, prudence, probity, and regula- 
rity; and must be able by the nature of his connexions, to procure 
the loan of capital he may happen himself not to possess. These 
requisites shut out a great many competitors. 

In the second place, this kind of labour requires a combination of 
moral qualities, that are not often found together. Judgment, per- 
severance, and a knowledge of the world, as well as of business. 
He is called upon to estimate, with tolerable accuracy, the import- 
ance of the specific product, the probable amount of the demand, and 
the means of its production: at one time he must employ a great 

of Nations, book i. c. 8. And no wonder he found himself thus perplexed; their 
value is regulated upon entirely different principles. The profits of labour de- 
pend upon the degree of slcill, activity, judgment, &c. exerted; those of capital, 
on the abundance or scarcity of capital, the security of the investment, &c. 
* Fide supra, Boole I. chap. 6. 



CHAP. VII. ON DISTRIBUTION. 335 

number of hands; at another, buy or order the raw material, collect 
labourers, find consumers, and give at all times a rigid attention to 
order and economy; in a word, he must possess the art of superin- 
tendence and administration. He must have a ready knack of cal- 
culation, to compare the charges of production with the probable 
value of the product when completed and brought to market. In 
the course of such complex operations, there are abundance of 
obstacles to be surmounted, of anxieties to be repressed, of misfor- 
tunes to be repaired, and of expedients to be devised. Those who 
are not possessed of a combination of these necessary qualities, are 
unsuccessful in their undertakings; their concerns soon fall to the 
ground, and their labour is quickly withdrawn from the stock in 
circulation; leaving such only, as is successfully, that is. to say, 
skilfully directed. Thus, the requisite capacity and talent limits 
the number of competitors for the business of adventurers. Nor is 
this all: there is always a degree of risk attending such undertak- 
ings; however well they may be conducted, there is a chance of 
failure; the adventurer may, without any fault of his own, sink his 
fortune, and in some measure his character; which is another check 
to the number of competitors, that also tends to make their agency 
so much the dearer. 

_ All branches of industry do not require an equal degree of capa- 
city and knowledge. A farmer who adventures in tillage, is not 
expected to have such extensive knowledge as a merchant, who 
adventures in trade with distant countries. The farmer may do 
well enough with a knowledge of the ordinary routine of two or 
three kinds of cultivation. But the science necessary for conduct- 
ing a commerce with long returns is of a much higher order. It is 
necessary to be well versed, not only in the nature and quality of 
the merchandise in which the adventure is made, but likewise to 
have some notion of the extent of demand, and of the markets 
whither it is consigned for sale. For this purpose, the trader must 
be constantly informed of the price-current of every commodity in 
different parts of the world. To form a correct estimate of these 
prices, he must be acquainted with the different national currencies, 
and their relative value, or, as it is termed, the rate of exchange. 
He must know the means of transport, its risk and expense, the cus- 
tom and laws of the people he corresponds with; in addition to all 
which, he must possess sufficient knowledge of mankind to preserve 
him from the dangers of misplaced confidence in his agents, corres- 
pondents, and connexions. If the science requisite to make a good 
farm is more common than that which can make a good merchant, 
it is not surprising, that the labour of the former is but poorly paid, 
in comparison with that of the latter. 

It is not meant by this to be understood, that commercial industry 
m every branch, requires a combination of rarer qualifications than 
agricultural. The retail, dealers for the most part pursue the routine 
of their business quite as mechanically as the generality of farmers; 
and, in some kinds of cultivation, very uncommon care and sagacity 



336 ON DISTRIBUTION. book ii. 

are requisite. It is for the reader to make the application: the busi- 
ness of the teacher is, firmly to establish general principles; whence 
it will be easy to draw a multitude of inferences, varied and modified 
by circumstances, which are themselves the consequences of other 
principles laid down in other parts of the subject. Thus, in astro- 
nomy, when we are told, that all the planets describe equal areas in 
the same space of time, there is an implied reservation of such 
derangements, as arise from the proximity of other planets, whose 
attractive powers depend on another law of natural philosophy; and 
this must be attended to in the examination of the phenomena of 
each in particular. It is for him, who would apply general laws to 
particular and isolated cases, to make allowance for the influence of 
each of those laws or principles, whose existence is already recog- 
nised. 

In reviewing presently the profits of mere manual labour, we 
shall see the peculiar advantage, which his character of master gives 
to the adventurer over the labourer; but it may be useful to observe 
by the way the other advantages within reach of an intelligent su- 
perior. He is the link of communication, as well between the va- 
rious classes of producers, one with another, as between the producer 
and the consumer. He directs the business of production, and is 
the centre of many bearings and relations; he profits by the know- 
ledge and by the ignorance of other people, and by every accidental 
advantage of production. 

Thus, it is this class of producers, which accumulates the largest 
fortunes, whenever productive exertion is crowned by unusual suc- 
cess. 



Section IV. 

Of the Profits of the Operative Labourer.^ _^ 

Simple, or rude labour may be executed by any man possessed 
of life and health; wherefore, bare existence is all that is requisite 
to insure a supply of this description of industry. Consequently, 
its wages seldom rise in any country much above what is absolutely 
necessary to subsistence; and the quantum of supply always re- 
mains on a level with the demand; nay, often goes beyond it; for 
the difiiculty lies not in acquiring existence, but in supporting it. 
Whenever the mere circumstance of existence is sufficient for the 

* By the term labourer, I mean, the person who works on account of a mas- 
ter-agent, or adventurer, in industry; for such as are masters of their own labour, 
like the eobler in his stall, or the itinerant knife-grinder, unite the two charac- 
ters of adventurer and labourer; their profits being in part governed by the cir- 
cumstances detailed in the preceding section, and partly by those developed in 
this. It is necessary also to premise, that the labour spoken of in the present sec- 
tion is that, which requires little or no study or training; the acquisition of any 
talent or personal skill entitles the possessor to a further profit, regulated upon 
the principles explained, supra, sect. 1. of this chapter. 



CHAP. vir. ON DISTRIBUTION. 337 

execution of any kind of work, and that work affords the means of 
supporting existence, the vacuum is speedily tilled up. 

There is, however, one thing to be observed. Man does not 
come into the world with the size and strength sufficient to perform 
labour even of the rudest kind. He acquires this capability not till 
the age of fifteen or twenty, more or less, and may be regarded as an 
item of capital, formed of the growing annual accumulation of the 
sums spent in rearing him.* By whom, then, is this accumulation 
effected.'' In general by the parents of the labourer, by persons of 
his own calling, or of one akin to it. In this class of life, therefore, 
the wages are somewhat more than is necessary for bare personal 
existence; they must be sufficient to maintain the children of the 
labourer also. 

If the wages of the lowest class of labour were insufficient to 
maintain a family, and bring up children, its supply would never be 
kept up to the complement; the demand would exceed the supply 
in circulation; and its wages would increase, until that class were 
again enabled to bring up children enough to supply the deficiency. 

This would happen, if marriage were discouraged amongst the 
labouring class. A man without wife or children may afford his 
labour at a much cheaper rate, than one who is a husband and a 
father. If celibacy were to gain ground amongst the labouring 
class, that class would not only contribute nothing to recruit its own 
members, but would prevent others from supplying the deficiency. 
A temporary fall in the price of manual labour, arising from the 
cheaper rate, at which single men can affi^rd to work, would soon 
be followed by a disproportionate rise; because the number of 
workmen would fall off. Thus, even were it not more to the inter- 
est of masters to employ married men, on account of their steadi- 
ness, they should do so, though at a greater charge, to avoid the 
higher price of labour, that must eventually recoil on them. 

Every particular line or profession does not, indeed, recruit its 
own numbers wdth children nursed among its own members. The 
new generation is transferred from one class of life to another, and 
particularly from rural occupations to occupations of a similar cast 
in the towns; for this reason, that children are cheaper trained in 
the country: all I mean to say is, that the rudest and lowest class of 
labour necessarily derives from its product a portion sufficient, not 
merely for its present maintenance, but likewise for the recruiting 
of its numerical strength.! 

When a country is on the decline, and contains less of the means 

* A full grown man is an accumulated capital; the sum spent in rearing him 
is indeed consumed, but consumed in a reproductive way, calculated to yield the 
product, man. 

t The evidence examined before a committee of the House of Commons of 
England, in 1815, leads to the conclusion, that the high price of food, at that 
period, had the etTect of depressing, rather than elevating the scale of wages. I 
have myself remarked the similar effect of the scarcities in France, of the years 
1811 and 1817. The difficulty of procuring subsistence either forced more 
43 



338 ON DISTRIBUTION. bookii. 

of production, and less of knowledge, activity, and capital, the de- 
mand for raw or simple labour diminishes by degrees; wages fall 
gradually below the rate necessary for recruiting the labouring class; 
its numbers consequently decrease, and the offspring of the other 
classes, whose employment diminishes in the same proportion, is 
degraded to the step immediately below. On the contrary, when 
prosperity is advancing, the inferior classes not only fill up their 
own complement with ease, but furnish a surplus and addition to 
the classes immediately above them: and some, by great good for- 
tune or brilliancy of talent, arrive at a still loftier eminence, and 
reach even the highest stations in society. 

The labour of persons not entirely dependent for subsistence on 
the fruits of labour can be afforded cheaper, than that of such as are 
labourers by occupation. Being fed from other sources, their wages 
are not settled by the price of subsistence. The female spinners in 
country villages probabl)^ do not earn the half of their necessary 
expenses, small as they are: one is perhaps the mother, another the 
daughter, sister, aunt, or mother-in-law of a labourer, who would 
probably support her, if she earned nothing for herself. Were she 
dependent for subsistence on her own earnings only, she must evi- 
dently double her prices, or die of want; in other words, her in- 
dustry must be paid doubly, or would cease to exist. 

The same may be said of most kinds of work performed by 
females. They are in general but poorly paid, because a large pro- 
portion of them are supported by other resources than those of their 
own industry, and can, therefore, supply the work they are capable 
of at a cheaper rate, than even the bare satisfaction of their wants. 
The work of the monastic order is similarly circumstanced. It is 
fortunate for the actual labourers in those countries where mona- 
chism abounds, that it manufactures little else but trumpery; for, if 
its industry were applied to works of current utility, the necessi- 
tous labourers in the same department, having families to support, 
would be unable to work at so low a rate, and must absolutely 
perish by want and starvation. The wages of manufacturing, are 
often higher than those of agricultural labour; but they are liable to 
the most calamitous oscillation. War or legislative prohibition 
will sometimes suddenly extinguish the demand for a particular 
product, and reduce the industry employed upon it to a state of ut- 
ter destitution. The mere caprice of fashion is often fatal to whole 
classes. The substitution of shoe ribbands for buckles was a severe 
temporary blow to the population of Sheffield and Birmingham."^ 

The smallest variations in the price of rude or simple labour have 
ever been justly considered as serious calamities. In classes of 
somewhat superior wealth, and talents, which are, in fact a species 
of personal wealth, a diminution in the rate of profits entails only a 

labourers into the market, or exacted more exertion from those already engaged; 
thus occasioning a temporary glut of labour. But the necessary sufferings of 
the labouring class at the time must inevitably have thinned its ranks. 
* Malthus, Essay on Popul. ed. 5. b. iii. c. 13. 



CHAP. VII. ON DISTRIBUTION. 339 

reduction of expense, or, at most, but trenches, in some measure, 
upon the capital those classes generally have at their disposal. But 
to those, whose whole income is a bare subsistence, a fall of wages 
is an absolute death-warrant, if not to the labourer himself, to part 
of his family at least. 

Wherefore, all governments, pretending to the smallest paternal 
solicitude for their subjects' welfare, have evinced a readiness to aid 
the indigent class, wherever any unexpected event has accidentally 
reduced the wages of common labour below the level of the labour- 
er's subsistence. Yet the benevolent intentions of the government 
have too often failed in their efficacy, for want of judgment in the 
choice of a remedy. To render it effective, it is necessary first to 
explore the cause of depression in the price of labour. If that de- 
pression be of a permanent nature, pecuniary and temporary aid is 
of no possible avail, and merely defers the pressure of the mischief. 
Of this nature are the discovery of new processes, the introduction 
of new articles of import, or the emigration of a considerable num- 
ber of consumers. (a) In such emergencies, a remedy must be 
sought in the discovery of some new and permanent occupation for 
the hands thrown out of employ, in the encouragement of new 
channels of industry, in the setting on foot of distant enterprises, 
the planting of colonies, &c. 

If the depression be not of a permanent nature, if it be the mere 
result of good or bad crops, the temporary assistance should be 
limited to the unfortunate sufferers by the oscillation. 

Governments or individuals, who attempt indiscriminate benefi- 
cence, will have the frequent mortification of finding their bounty 
unavailing. This may be more convincingly demonstrated by ex- 
ample than by argument. 

Suppose in a vine district the quantity of casks to be so abundant, 
as to make it impossible to use them all. A war, or a statute le- 
velled against the production of wine, ma}^, perhaps, have caused 
many proprietors of vineyards to adopt a different cultivation of 
their lands; this is a permanent cause of surplus cooperage in the 
market. In ignorance of this cause, a general effort is made to as- 
sist the labouring coopers, either by purchasing their casks without 
wanting them, or b}' making up, in the shape of alms, the loss they 
have sustained in the diminution of their profits. Useless pur- 



(a) The second and last of these circumstances are neither of them necessa- 
rily, universally, or permanently, followed by the depression of the rate of wages. 
When a new object of import does not supersede one of either home or foreign 
production, it must tend to raise the rate of wages, as it can only be procured by 
enlarged home production. The emigration of consumers, continuing to draw 
subsistence from the country they desert, leaves in activity an equal mass of 
human labour, though possibly with some variation of employment. Besides, 
it may be temporary only, as that of the English to the continent, and of the 
Irish both to England and to the continent; who possibly might be brought 
back by an improvement of domestic finances or of domestic security and com- 
fort. T. 



340 ■ ON DISTRIBUTION. book ii. 

chases, or eleemosynary aid, however, can not last forever; and, 
the moment they cease, the poor coopers will find themselves pre- 
! cisely in the same distressful situation, from which it was attempted 
to extricate them. "1^11 the sacrifices and expense will have been 
incurred with no advantage, other than that of a little delay in the 
date of their hopeless sufferings and privations. 

Suppose on the contrary, the cause of the superabundance of casks 
to be but temporary; to be nothing more than the failure of the an- 
nual crop. If, instead of affording temporary relief to the working 
coopers, they be encouraged to remove to other districts, or to enter 
upon some other branch of industry, it will follow, that the next 
year, when wjne may be abundant, there will be a scarcity of casks 
to receive it; the price will become exorbitant, and be settled at the 
suggestion of avarice and speculation; which being unable them- 
selves to manufacture casks, after the means of producing them have 
been thus destroyed, part of the wme will probably be spoiled for 
want of casks to hold it. It will require a second shock and derange- 
ment of the rate of wages, before the manufacture of the article can 
be brought again to a level with the demand. 

Whence it is evident, that the remedy must be adapted to the par- 
ticular cause of the mischief; consequently, the cause must be ascer- 
tained, before the remedy is devised. 

Necessary subsistence, then, may be taken to be the standard of 
the wages of common raw labour; but this standard is itself extreme- 
ly fluctuating; for habit has great influence upon the extent of human 
wants. It is by no means certain, that the labourers of some can- 
tons of France could exist under a total privation of wine. In Lon- 
don, beer is considered indispensable; that beverage is there so much 
an article of necessity, that beggars ask for money to buy a pot of 
beer, as commonly as in France for the purchase of a morsel of 
bread; and this latter object of solicitation, which appears to us so 
very natural, may seem impertinent to foreigners just arrived from a 
country, where the poor subsist on potatoes, manioc, or other still 
coarser diet. 

What is necessary subsistence, depends, therefore, partly on the 
habits of the nation, to which the labourer may happen to belong. 
In proportion as the value he consumes is small, his ordinary wages 
may be low, and the product of his labour cheap. If his condition 
be improved, and his wages raised, either his product becomes 
dearer to the consumer, or the share of his fellow producers is 
diminished. 

The disadvantages of their position are an effectual barrier against 
any great extension of the consumption of the labouring classes. 
Humanity, indeed, would rejoice to see them and their families 
dressed in clothing suitable to the climate and season; houses in 
roomy, warm, airy, and healthy habitations, and fed with wholesome 
and plentiful diet, with perhaps occasional delicacy and variety; but 
there are very few countries, where wants, apparently so moderate, 
are not considered far beyond the limits of strict necessity, and 



CHAP. VII. ON DISTRIBUTION. 341 

therefore not to be gratified by the customary wages of the mere 
labouring class. 

The limit of strict necessity varies, not only according to the more 
or less comfortable condition of the labourer and his family, but 
likewise according to the several items of expense reputed unavoid- 
able in the country he inhabits. Among these is the one we have 
just adverted to; namely, the rearing of children; there are others 
less urgent and imperative in their nature, thout^h equally enforced 
by feeling and natural sentiments; such as the care of the aged, to 
which unhappily the labouring class ^re far too inattentive. Na- 
ture could entrust the perpetuation of the human species to no im- 
pulse less strong, than the vehemence of appetite and desire, and the 
anxiety of paternal love; but has abandoned the aged, whom she no 
longer wants, to the slow workings of filial gratitude, or, what is 
even less to be depended upon, to the providence of their younger 
years. Did the habitual practice of society imperatively subject eve- 
ry family to the obligation of laying by some provision for age, as 
it commonly does for infancy, our ideas of necessity would be some- 
what enlarged, and the minimum of wages somewliat raised. 

It must appear shocking to the eye of philanthropy, that such is 
not always the case. It is lamentable to think of the little provi- 
dence of the labouring classes against the season of casual misfor- 
tune, infirmity, and sickness, as well as against the certain helpless- 
ness of Old age. Such considerations afford most powerful reasons 
for forwarding and encouraging provident associations of the labour- 
ing class, for the daily deposit of a trifling saving, as a fund in reserve 
for that period, when age, or unexpected calamity, shall cut ofi" the 
resource of their industry.* But such institutions can not be ex- 

* Saving banks have succeeded in several districts of England, Holland, and 
Germany; particularly where the government has been wise enough to withhold 
its interference. The Insurance Company of Paris has set one on foot, upon 
the most liberal principles and with the most substantial guarantee. It is to be 
hoped, that the labouring classes in general will see the wisdom of placing their 
little savings in such an establishment, in preference to the hazardous invest- 
ments they have often been decoyed into. There is besides a further national 
advantage in such a practice, namely, that of augmenting the general mass of 
productive capital, and consequently extending the demand for liuman agency. (1) 

(1) [In the principal cities of the United States, Saving Banlis have also 
been established, and have been attended with so much benefit, that they are 
now spreading through every part of the Union. To the Friendly or Beneficial 
Societies there are strong objections, to which the vSaving Banks are not liable. 
The Friendly Societies have, undoubtedly, done some good; but attended with 
a certain portion of evil. The following extract from a report of the Committee 
of the Highland Society, places these latter societies in a very proper light. 

"During the last century, a number of Friendly Societies have been estab- 
lished by the labourers in different parts of Great Britain, to enable them to 
make provision against want. The principle of these societies usually is, that 
the members pay a certain stated sum periodically, from which an allowance is 
made to them upon sickness or old age, and to their families upon their death. 
These societies have done much good; but they are attended with some disad- 
vantages. In particular, the frequent meetings of the members occasion the loss 



342 ON DISTRIBUTION. bookii. 

pected to succeed, unless the labourer be taught to consider these 
means of precaution as a matter of duty and necessity, and hold to 
the -obligation to carry his savings to such places of deposit, as 
equally indispensable with the payment of his rent or taxes: this 
new duty would doubtless tend in a slight degree to raise the scale 
of wages so as to allow of such frugality, but for that very reason 
it is desirable. How can such establishments thrive in countries 
where habit and the interested views of the government conspire 
to make the labourer spend in the public-house not only what he 
might lay by, but frequently the very subsistence of his family, in 
which all his comforts and pleasures should be centered. The vain 
and costly amusements of the rich are not always justifiable in the 
eye of reason; but how much more disastrous is the senseless dissi- 
, pation of the poor! The mirth of the indigent is invariably season- 
ed with tears; and the orgies of the populace are dayS of mourning 
to the philosopher. 

Besides the reasons advanced in this and the preceding sections, 
to explain why the wages of the adventurer, even if he derive no 
profit as a capitalist, are generally higher than those of the mere 
labourer, there are others, not so solid or well founded indeed, but 
such as nevertheless must not be overlooked. 

The wages of the labourer are a matter of adjustment and compact 
between the conflicting interests of master and workman; the latter 
endeavouring to get as much, the former to give as little, as he pos- 
sibly can; but, in a contest of this kind, there is on the side of the 
master an advantage, over and above what is given him by the nature 
of his occupation. The master and the workman are no doubt 
equally necessary to each other; for one gains nothing but with the 
others assistance; the wants of the master are, however, of the two, 
less urgent and less immediate. There are few masters but what 
could exist several months or even years, without emjDloying a 
single labourer; and few labourers that can remain out of work for 
many weeks, without being reduced to the extremity of distress. 
And this circumstance must have its weignt in striking the bargain 
for wages between them. 

Sismondi, in a late work* published since the appearance of my 

of much time, and frequently of a good deal of money spent in entertainments. 
The stated payments must be regularly made; otherwise after a certain time, 
the member (necessarily from its being in fact an insurance) loses the benefit 
of all that he has formerly paid. Nothing more than the stated payments can 
be made, however easily the member might be able at the moment to add a little 
to his store. Frequently the value of the chances on which the societies are 
formed, is ill calculated; in wt)ich case either the contributors do not receive an 
equivalent for iheir payments, or too large an allowance is given at first, which 
brings on the bankruptcy of the institution. Frequently the sums are embezzled 
by artful men, who by imposing on the inexperience of the members, get them- 
selves elected into offices of trust. The benefit is distant and contingent; each 
member not having benefit from his contributions in every case, but only in the 
case of his falling into the situations of distress provided for by the society. 
And the whole concern is so complicated, that many have hesitation in embark- 
ing in it their hard earned savings."] American Editor. 
* Nouveaux Prin. d'Econ. Pol. liv. vii. c. 9. 



CHAP. VII. ON DISTRIBUTION. 343 

third edition, has suggested some legislative provisions, for the 
avowed purpose of bettering the condition of the labouring classes 
He sets out with the position, that the low rate of their wages ac- 
crues to the benefit of the adventurers and masters who employ 
them; and thence infers, that in the moment of calamity, their claim 
for relief is upon the masters, and not upon society at large. Where- 
fore, he proposes to make it obligatory upon the proprietors and 
farmers of land at all times to feed the agricultural, and upon the 
manufacturers to provide subsistence for the manufacturing labourer. 
On the other hand, to prevent the probable excess of population, 
consequent upon the certain prospect of subsistence to themselves 
and their families, he would give to their respective masters the 
right of preventing or permitting marriage amongst their people. 

This scheme, however entitled to favourable consideration by the 
motive of humanity in which it originated, seems to me altogether 
impracticable. It would be gross violation of the right of property, 
to saddle one class of society with the compulsory maintenance of 
another; and it would be a violation still more gross, to give one 
set of men a personal control over another; for the freedom of per- 
sonal action is the most sacred of all the objects of property. The 
arbitrary prohibition of marriage to one class is a premium to the 
procreation of all the rest. Besides, there is no truth in the posi- 
tion, that the low rate of wages redounds exclusively to the profit 
of the master. Their reduction, followed up by the constant action 
of competition, is sure to bring about a fall of the price of products; 
so that it is the class of consumers, in other words, the whole com- 
munity, that derives the profit. And if it be so great as to throw 
the subsistence of the labourers upon the public at large, the public 
IS in a great measure indemnified by the reduced prices of the objects 
of its consumption. 

There are some evils incident to the imperfection of the human 
species, and to the constitution of nature; and of this description is 
the excess of population above the means of subsistence. On the 
whole, this evil is quite as severely felt in a horde of savages, as in 
a civilized community. It would be unjust to suppose it a creature 
of social institutions, and a mere fallacy to hold out the prospect of 
a complete remedy; and, however it may merit the thanks of man- 
kind to study the means of palliation, we must be cautious not to 
give a ready ear to expedients that can have no good effect, and 
must prove worse than the disease itself. A government ought 
doubtless to protect the interests of the labouring classes, as far as it 
can do so without deranging the course of human affairs, or cramp- 
ing the freedom of individual dealings; for those classes are less 
advantageously placed than the masters, in the common course of 
things; but a wise ruler will studiously avoid all interference 
between individuals, lest it superadd the evils of administration to 
those of natural position. Thus, he will equally protect the master 
and the labourer from the effects of combination. The masters have 
the advantage of smaller numbers and easier communication; where- 



344 ON DISTRIBUTION. bookii. 

as, the labourers can scarcely combine, without assuming the air of 
revolt and disaffection, which the police is ever on the watch to 
repress. Nay, the partisans of the exporting system have gone so 
far as to consider the conibinationsof the journeymen as injurious to 
national prosperity, because they tend to raise the price of the com- 
modities destined for export, and thereby to injure their preference 
in the foreign market, which they look upon as so desirable. But 
what must be the character of that policy, which aims at national 
prosperity through the impoverishment of a large proportion of the 
home producers, with a view to supply foreigners at a cheaper rale, 
and give them all the benefit of the national privation and self- 
denial? 

One sometimes meets with masters, who, in their anxiety to 
justify their avaricious practices by argument, assert roundly, that 
the labourer would perform less work, if better paid, and that he 
must be stimulated by the impulse of want. Smith, a' writer of no 
small experience and singular penetration, is of a very different 
opinion. Let us take his own words. "The liberal reward of 
labour, as it encourages the propagation, so it increases the industry 
of the common people. The wages of labour are the encouragement 
of industry, which, like every other human quality, improves in 
proportion to the encouragement it receives. A plentiful subsist- 
ence increases the bodily strength of the labourer, and the comfort- 
able hope of bettering his condition, and of ending his days perhaps 
in ease and plenty, animates him to exert that strength to the utmost. 
Where wages are high, accordingly, we shall always find the work- 
men more active, diligent, and expeditious, than where they are 
low; in England, for example, than Scotland; in the neighbourhood 
of great towns, than in remote country places. Some workmen, 
indeed, when they can earn in four days what will maintain them 
through the week, will be idle the other three. This, however, is 
by no means the case with the greater part. Workmen, on the con- 
trary, when they are liberally paid by the piece, are very apt to 
overwork themselves, and to ruin their health and constitution in a 
few years."* 



Section V. 

Of the Independence accruing to the Moderns from the Advance- 
ment of Industry. 

The maxims of political economy are immutable; ere yet observed 
or discovered, they were operating in the way above described; the 
same cause regularly producing the same effect; the wealth of Tyre 
and of Amsterdam originated in a common source. It is society 
that has been subject to change, in the progressive advancement of 
industry. 

* Wealth of Nations, book i, c. 8. 



CHAP. VII. ON DISTRIBUTION. 



345 



The ancients were not nearly so far behind the moderns in agri- 
culture, as in the mechanical arts. Wherefore, since aericultiJral 
products are alone(l) essential to the multiplication of mankind the 
unoccupied surplus of human labour was larger than in modern 
days. Those, who happened to have little or no land, unable to 
subsist upon the product of their own industry, unprovided with 
capital, and too proud to engage in those subordinate employments 
which were commonly filled by slaves, had no resource but to bor- 
row, without a prospect of the ability to repay, and were continu- 
ally demanding that equal division of property, which was utterly 
impracticable. With a view to stifle their discontents, the leading 
men of the state were obliged to engage them in warlike enterprises 
and, in the intervals of peace, to f-ubsist them on the spoils of the' 
enemy, or on their own private means. This was the grand source 
of the civil disorder and discord, which continually distracted the 
states of antiquity; of the frequency of their wars, of the corruption 
of their suffrages, and of the connexion of patron and client, which 
backed the ambition of a Marius and a Sylla, a Pompey and a 
Caesar, an Antony and an Octavius, and which finallv reduced the 
whole Roman people to the condition of servile attendants upon the 
court of a Caligula, a Heliogabalus, or some monster of equal enor- 
mity, whose grand condition of empire was the subsistence of the 
objects of his atrocious tyranny. 

The industrious cities of Tyre, Corinth, and Carthage, were some- 
what differently circumstanced; but they could not permanently 
resist the hostility of poorer and more warlike nations, impelled by 
the prospect of plunder. Industry and civilization were the conti- 
nual prey of barbarism and penury; and Rome herself, at length, 
yielded to the attack of Gothic and Vandalic conquerors. 

Thus replunged into a state of barbarism, the condition of Europe, 
during the middle ages, was but a revival of the earliest scenes of 
Grecian and Italian history, in an aggravated form. Each baron or 
great landholder, was surrounded by a circle of vassals or clients on 
his domain, ready to follow him in civil broils or foreign warfare. 

(1) The "multiplication of mankind" is not, as is here asserted by ourauthor, 
a/one dependant upon "agricultural products;" but, likewise, upon every other 
descriptiou of commodities essential to human maintenance and support. Food, 
or subsistence, is unquestionably indispensable to the existence of man; but not 
more necessary to his prolon.red being; and health, than raiment, shelter and 
fire. The position of Mr. Malthus, which limits population to subsistence 
only, and which is here taken for granted and adopted by our author, is not 
accurate or just; and by the more recent political economical inquirers has, 
therefore, either been modified or abandoned. Professor Senior, in his "Two 
Lectures on^ Population, delivered before the University of Oxford in Easter 
Term, 1828," in considering the general principles, adopts the following propo- 
sition, as what appears to him an outline of the laws of population: " That the 
population of a given district is limited only by moral or physical evil, or by 
the apprehension of a deficiency in the means of obtaining those articles of wealth; 
or, in other words, those necessaries, decencies and luxuries, which the habits 
of the individuals of each class of the inhabitants of that district lead them to 
require. Amehican Editor. 

44 



346 OTS DISTRIBUTION. book ii. 

I should trench upon the province of the historian, were I to 
attempt the delineation of the various causes that have aided the 
progress of industry since that period; but I may be allowed merely 
to note, by the way, the great change that has been effected, and the 
consequence of that change. Industry has become a means of sub- 
sistence to the bulk of the population, independent of the caprice of 
the large proprietors, and without being to them a constant source of 
alarm: it is nursed and supported by the capital accumulated by its 
own exertions. The relation of client and vassal has ceased to 
exist; and the poorest individual is his own master, and dependent 
upon his personal faculties alone. Nations can support themselves 
upon their internal resources; and governments derive from their 
subjects those supplies, which they were wont to dispense as a mat- 
ter of favour. 

The increasing prosperity of manufacture and commerce have 
raised them in the scale of estimation. The object of war is changed, 
from the spoliation and destruction of the sources of wealth, to their 
quiet and exclusive possession. For the last two centuries, where 
war has not been made to gratify the childish vanity of a nation or 
a monarch, the bone of contention has always been, either colonial 
sovereignty, or commercial monopoly. Instead of a contest of hun- 
gry barbarians against their wealthy and industrious neighbours, it 
has been one between civilized nations on either side; wherein the 
victor has shown the greatest anxiety to preserve the resources of 
the conquered territory. The invasion of Greece by the Turks, in 
the fifteenth century, appears to have been the final effort of pure 
barbarism arrayed against civilization. The present preponderance 
of industry and civilized habits amongst the general mass of man- 
kind seems to exclude all probability of a recurrence of such cala- 
mitous events. Indeed, the improvement of military science takes 
away all fear of the result of such a conflict. 

There is yet one step more to be made; and that can only be ren- 
dered practicable by the wider diffusion of the principles of politi- 
cal economy. They will some day have taught mankind that the 
sacrifice of their lives, in a contest for the acquisition or retention of 
colonial dominion or commercial monopoly, is a vain pursuit of a 
costly and delusive good; that external products, even those of the 
colonial dependencies of a nation, are only procurable with the pro- 
ducts of domestic growth: that internal production is, therefore, the 
proper object of solicitude, and is best to be promoted by political 
tranquillity, moderate and equal laws, and facility of intercourse. 
The fate of nations will thenceforth hang no longer upon the preca- 
rious tenure of political pre-eminence, but upon the relative degree 
of information and intelligence. Public functionaries will grow 
more and more dependent upon the productive classes, to whom 
they must look for supplies; the people retaining the right of taxa- 
tion in their own hands, will always be well governed; and the 
struggles of power against the current of improvement will end in 
its own subversion; for it will vainly strive against the dispensations 
of nature. 



CHAP. VIII. ON DISTRIBUTION. 347 

CHAPTER VIII. 

OF THE REVENUE OP CAPITAL. 

The service, rendered by capital, in productive operations, esta- 
blishes a demand for capital to be so employed, and enables the pro- 
prietors of it to charge more or less for that service. 

Whether the capitalist thus employ his capital himself, or lend it 
to another for that purpose, it yields a profit, that is called the profit 
of capital, distinct from that of the industry employing it. In the 
former case, the profit obtained constitutes the revenue of his capi- 
tal, which is added to that of his personal talent and industry, and 
often confounded with it. — In the latter, the revenue of capital is 
precisely the interest paid for its use, the proprietor abandoning to 
the borrower the profit derivable from his personal employment of 
the capital lent. 

As the investigation of the interest of capital lent will help to 
throw light on the subject of the profit derivable from its personal 
employment, it may be as well, in the first instance, to acquire a 
just idea of the nature and variation of interest. 

Section I. 
Of Loans at Interest. 

The interest of capital lent, improperly called the interest of 
money, was formei'ly denominated usury, that is to say, rent for its 
use and enjoyment; which, indeed, was the correct term; for interest 
is nothing more than the price, or rent, paid for the enjoyment of 
an object of value. But the word has acquired an odious meaning, 
and now presents to the mind the idea of illegal, exorbitant interest 
only, a milder but less expressive term having been substituted by 
common usage. 

Before the functions and utility of capital were known, it is pro- 
bable, that the demand of rent for it by lenders was considered an 
abuse and oppression, — an expedient to favour the rich and prejudice 
the poor; nay, further, that frugality, the sole means of amassing 
capital, was regarded as parsimony, and deemed a public mischief 
by the populace, in whose eyes, the sums not spent by great pro- 
prietors were looked upon as lost to themselves. They could not 
comprehend, that money, laid by to be turned to account in some 
beneficial employment, must be equally spent; for, if it were buried, 
it could never be turned to account at all; that it is, in fact, spent in 
a manner a thousand times more profitable to the poor;* and that a 

* Vide infra, Book III. on the subject of reproductive consumption. 



348 ON DISTRIBUTION. bookii. 

labouring man is never sure of earning a subsistence, except where 
there is a capital in reserve for him to work upon. This prejudice 
against rich individuals, who do not spend their whole income, still 
exists pretty generally; formerly it was universal; lenders them- 
selves were not altogether free from it, but were so much ashamed 
of the part they were acting, as to employ the most disreputable 
agents in the collection of profits perfectly just, and highly advan- 
tageous to society. 

It is, therefore, not surprising that the ecclesiastical, and at several 
periods, the civil codes, likewise, should have interdicted loans at 
interest; and that, during the whole of the middle ages, throughout 
the larger states of Europe, this traffic should have been reputed 
infamous, and abandoned to the Jews. — The little manufacturing or 
commercial industry of those days was kept alive by the scanty 
capital of the dealers and mechanics themselves; and agricultural 
industry, which wa:s pursued with somewhat better success, was 
supported by the advances of the lords and great proprietors, who 
employed their serfs or retainers on their own account. Loans 
were contracted for, not with a view of profitably employing the 
money, but merely to satisfy some urgent want, so that the exaction 
of interest was profiting by a neighbour's distress; and it may easily 
be conceived, that a religion, founded on the principle of fraternal 
love, as the Christian religion is, must disapprove a calculating 
spirit, that even now is a stranger to generous bosoms, and repug- 
nant to the common maxims of morality. — Montesquieu* attributes 
the decline of commerce to this proscription of loans at interest; 
which was undoubtedly one cause, although, indeed, it was one 
amongst many. 

The progressive advance of industry has taught us to view the 
loan of capital in a different light. In ordinary cases, it is no longer 
a resource in the hour of emergency, but an agent, an instrument, 
which may be turned to the great benefit, as well of society, as 
of the individual. Henceforward, it will be reckoned no more 
avaricious or immoral to take interest, than to receive rent for land, 
or wages for labour; it is an equitable compensation adjusted by 
mutual convenience; and the contract, fixing the terms between 
borrower and lender, is of precisely the same nature, as any other 
contract whatsoever. 

In ordinary cases of exchange, however, the transaction is ended 
as soon as the exchange is completed; whereas, in the case of a loan, 
there remains to be calculated the risk the lender incurs of never 
recovering the whole, or at least a part, of his capital. The risk is 
practically estimated, and indemnified by some addition of interest, 
in the nature of a premium of insurance. Whenever there happens 
to be a question about the interest of advances, a careful distinction 
should be made between these, its two component parts; otherwise, 
there is always danger of error; and individuals, or even the agents 

* Esprit des Lois, liv. xxi. c. 30. 



CHAP. VIII. ON DISTRIBUTION. 349 

of public authority, will be apt to involve theniselves in useless and 
disastrous operations. 

Thus the practice of usury has been uniformly revived, whenever 
it has been attempted to limit the rate of interest, or abolish it alto- 
gether. The severer the penalties, and the more rigid their exaction, 
the higher the interest of money was sure to rise; and this is what 
might naturally have been expected; for the greater the risk, the 
greater premium of insurance did it require to tempt the lender. At 
Rome, while the republican form of government lasted, the interest 
of money was enoi'mous, as it was natural to suppose, even if it 
were not a matter of history. The debtors, who are always the 
plebians, were continually threatening their patrician creditors. The 
laws of Mahomet have prohibited loans at interest; and what is the 
consequence in the Mussulman dominions? Money is lent at 
interest, but the lender must be indemnified for the use of his capi- 
tal, and, moreover, for the risk incurred in the contravention of the 
law. It was the same in Christian countries, so long as loans at 
interest were illegal: and where the necessity of borrowing enforced 
the toleration of the practice amongst the Jews, such were the hu- 
miliation, oppression, and extortion, to which, on one pretext or 
another, that nation was exposed on this score, that nothing short 
of a very heavy rate of interest could indemnify for such repeated 
loss and mortification. Letters patent of the French king John, 
bearing date in the year 1360, are now extant, which authorizes the 
Jews to lend on pledges at the rate of four deniers per week for 
every livre of twenty sous, which is more than eighty-six per cent 
per annum; but, in the year following, the same monarch, though 
recorded as one of the most scrupulous performers of his royal word 
that our annals can boast of, caused the quantity of pure metal con- 
tained in the coin to be reduced; so that the lenders no longer 
received back a value equal to what they had lent. 

This explanation will alone sufiice to justify the very heavy inte- 
rest demanded, without at all taking into calculation, that at a period, 
when loans were negotiated, not to forward industrious enterprises, 
but to support war, to feed extravagance, and to further the most 
hazardous projects; at a period when laws were powerless, and lenders, 
unable legally to enforce their claims against their debtors, it required 
a very ample premium to cover the risk of non-payment. In fact, 
the premium of insurance absorbed the far greater part of what 
passed under the name of interest, or usury : and the actual bona fide 
interest, the rent for the use of capital lent, was reduced to a very 
trifle; for, though capital was scai-ce, there is reason to suppose, that 
productive employment was still more so. Of the 86 per cent inte- 
rest paid in the reign of king John, perhaps not more than 3 or 4 per 
cent was the equivalent for the productive service of the capital 
advanced; for all productive labour is better paid now, than it was 
in those days; and even now a-days the rent of capital can scarcely 
be reckoned higher than 5 per cent; the excess is so much premium 
of insurance for the lender^s indemnity. 



350 ON DISTRIBUTION. book ii. 

Thus, the ratio of the premium of insurance, which frequently 
forms the greater portion of what is called interest, depends on the 
degree of security presented to the lender; which security consists 
chiefly in three circumstances: — 1. The safety of the mode of 
employment; 2. The personal ability and character of the borrower; 
3. The good government of the country he happens to reside in. 
We have just seen, how much the hazardous purposes, to which loans 
were applied in the middle ages, enhanced the premium of insurance 
necessarily paid to the lender. 

It is the same with all perilous investments of capital, with a dif- 
ference in degree only. The Athenians of old, made a distinction 
between marine interest, or interest of capital afloat, and land-inte- 
rest, or interest on shore; the former was rated at 30 per cent, 
more or less per voyage, whether to the Euxine, or to any port in 
the Mediterranean.* As two such voyages were accomplished with 
ease in the year, the annual marine interest may be rated at about 60, 
while other interest was commonly not more than 12 per cent. 
Supposing that, of the 12 per cent, one half was assigned to cover 
the risk of the lender; we shall find, that the mere annual rent or 
hire of money at Athens, was 6 per cent only, which I should still 
think above the mark; yet, supposing it to have been so high, the 
marine interest allowed 54 per cent for insurance of the lender's 
risk. So enormous a premium must be attributed in part to the bar- 
barous habits then prevalent among the nations with whom they 
traded; for different nations were then much greater strangers to 
each other, than they are at present, and commercial laws and cus- 
toms much less respected; and in part to the imperfections of the 
art of navigation. There was more danger in a voyage from the 
Piraeus to Trapezus, though but three hundred leagues distant, than 
there is now in one from L'Orient to China, which is a distance of 
seven thousand. Thus, the improvements of geography and naviga- 
tion have contributed to lower the rate of interest, and ultimately to 
reduce the cost price of products. Loans are sometimes' contracted, 
not for a productive investment, but for mere barren consumption. 
Transactions of this kind should always awaken the suspicion of the 
lender, inasmuch as they engender no means of re-payment of either 
principal or interest. If charged upon a growing revenue, they are, 
at all events, an anticipation of that revenue; and if charged upon 
any of the sources of revenue, they afford the means of dissipating 
the particular source itself If there be the security neither of reve- 
nue nor of its source, they barely place the property of one person 
at the wanton disposition of another. 

Among the circumstances incident to the nature of the employ- 
ment, which influence the rate of interest, the duration of the loan 
must not be forgotten; ceteris paribus, interest is lower when the 
lender can withdraw his funds at pleasure, or at least in a very short 
period; and that both on account of the positive advantage of having 
capital readily at command, and because there is less dread of a risk, 

* Voyage cfAnacharsis, torn. iv. p. 371. 



CHAP. VIII. ON DISTRIBUTION. 351 

which may probably be avoided by timely retreat. The facility of 
immediate negotiation presented by the transferable bills and notes 
of modern governments, is one principal cause of the low rate of 
interest, at which many of these governments are enabled to bor- 
rovv.(a) This interest, in my opinion, hardly covers the risk of the 
lender; but he always reckons on the certainty of selling his securi- 
ties before the moment of catastrophe, should any serious alarm be 
entertained. The public securities that are not negotiable, bear a 
much higher interest; such, for instance, as the old personal annui- 
ties in France, which the government generally sold at the rate of 10 
per cent, a high average for young lives. Wherefore the Genevese 
acted with excellent judgment, in settling their annuities on thirty 
lives of well known public characters. By this means, they made 
their annuities negotiable, and so contrived to get the rate of interest 
of securities not negotiable, upon securities that were negotiable. 

About the vast influence of personal character and ability in the 
borrower, in determining the amount of the premium of insurance to 
the lender, there can be no doubt whatever: they are the basis of 
what is called personal credit; and it is hardly necessary to say, 
that a person in good credit borrows at a cheaper rate, than another 
who has none. 

Next to approved integrity and probity, what most contributes to 
the credit of an individual or of a government, is past punctuality in 
performance of engagements; this is, in fact, the very corner-stone 
of credit, and one that seldom proves insecure. But why, it may be 
asked, may not a man who has never yet made default in his pay- 
ment, fail the very next moment? There is very little probability 
that he will, especially if his punctuality be of long standing. For, 
to have been ever punctual in his payments, he must either have 
always been possessed of value in hand sufficient to meet demands 
upon him; that is to say, he must have been a man of property over 
and above his debts, which is the best possible ground of trust; or 
else he must have managed matters so well, and have speculated with 
so much judgment and safety, as always to have had his returns 
arrive before the calls became due; thus evincing a degree of ability 
and prudence, which afforded an excellent guarantee for his future 
punctuality. The converse of this is the reason, why a merchant, 
that has once failed or hesitated in the performance of his engage- 
ments, thenceforward loses his credit entirely. 

Finally, the good government of the country, where the debtor 
resides, reduces the risk of the creditor, and consequently, the pre- 
mium of insurance he is obliged to demand to cover that risk. 
Hence it is, that the rate of interest rises, whenever the laws and 
their administration do not insure the performance of engagements. 

(a) This is strongly illustrated by the unfunded and the funded debt of Great 
Britain. The former in the shape of exchequer and treasury bills, bears a rate 
of interest considerably lower than the latter in the shape of stock; because the 
bills are convertible readily at par; whereas, the usual rise and fall of the capital 
stock is much greater, than the interest upon it for short periods. T. 



•352 ON DISTRIBUTION. bookii. 

- It is yet more aggravated, when they excite to the violation of them; 
as when they authorize non-payment, or do not acknowledge the 
validity of dona ^flfe contracts. 

The resort to personal restraint against insolvent debtors has been 
generally considered as injurious to the borrower; but is, on the con- 
trary, much in his favour. Loans are made more willingly, and on 
better terms, where the rights of the lender are best secured by 
law. {a) Besides, the encouragement to accumulate capital is thereby 
enlarged; wherever individuals mistrust the mode of investing their 
savings, there is a strong inducement to every one to consume the 
whole of his income, and this consideration will, perhaps, help to 
explain a curious moral phenomenon; namely, that irresistible 
avidity for excessive enjoyment, which is a common symptom in 
times of political turbulence and confusion.* 

However, while on the subject of the necessity of personal severity 
towards debtors, I cannot recommend the practice of imprisonment; 
to confine a debtor is to command him to discharge his debts, and at 
the same time deprive him of th« means of so doing. There seems 
more reason in the Hindu institution, giving the creditor the option 
of seizing the person of his insolvent dettor, and confining him at 
the creditor's own home to compulsory labour, for the creditor's 
benefit, t But, whatever be the means, whereby the public authority 
enforces the payment of debts, they must always be ineffective, if 
law be partially or capriciously administered. The moment a debtor, 
IS, or hopes to be, out of his creditor's reach, there is a risk to be run 
by the creditor, which is of value, and must be indemnified. 

After having thus detached from the rate of bare interest all that 
is paid as premium of insurance to the lender against the risk of total 
or partial loss of his capital, it remains to consider that part, which 
IS purely and simply interest; that is to say, rent paid for the utility 
and the use of capital. 

Now this portion of the gross sum called interest is larger in pro- 

* See the description of the Plague at Florence, as given after Boccacio by 
isismondt, in his admirable Histoire des Republiques dUtalie. A similar eflfect 
was observed at several of the most dreadful epochs of the French revolution. 

J Raynal, Histoire Philosophique, torn. i. 



(a) The personal restraint of the debtor has no where been carried to such 
extreme length as in England. Not only was a debtor at one time liable to 
im^nsonmexit pendente lite,and before the debt was legally established, and that 
for the smallest sum; but the term of his imprisonment in execution after judg- 
ment, was absolutely unlimited. The hardship, in both these particulars, was 
partially remedied before the erection of our insolvent code; and that code has 
still further alleviated the condition of the debtor. But the whole systenj is 
vitiated, and in a great measure, neutralized, by total neglect of all measures 
tor the prevention of insolvency, in limine. The grand expedient is, publicity 
ot property; which, in the first place, gives the creditor the means of estimating 
beforehand, and with more accuracy, the grounds and fair extent of his debtor's 
credit; and in the next, enables him, in case of defa'ult, to resort to those means, 
instead of endeavouring to discover or extort them by personal restraint. Thus 
It IS, that one error of policy is sure to engender another. T. 



CHAP. VIII. ON DISTRIBUTION. 353 

portion as the supply of capital available for loans is less; and as the 
demand of capital for that specific object is greater; and again, that 
demand is the greater in proportion to the more numerous and more 
lucrative employments of capital. Consequently, a rise in the rate 
of interest does not infallibly or universally denote, tiiat capital is 
growing scarcer; for possibly, it may be a sign, that its uses are 
multiplied. Smith has remarked this consequence upon the close of 
the very successful war on the part of England, which terminated 
with the peace of 1763.*^ The rate of interest then advanced instead 
of declining; the important acquisitions of England had opened a 
new field for her commercial enterprise and speculation; capital was 
not diminished in quantity, but the demand for it was increased; and 
the rise of interest, which ensued, though in most cases a sign of 
impoverishment, was in this, a consequence of the acquisition of new 
sources of wealth. 

France, in 1812, experienced the opposite effect of a cause directly 
the reverse. A long and destructive war, which had annihilated 
almost all external communication; exorbitant taxation; the ruinous 
system of licenses; the commercial enterprises of the government 
itself; frequent and arbitrary alterations in the duties on import; 
confiscation, destruction, vexation; in fine, a system of administra- 
tion uniformly avaricious and hostile to private interest, had ren- 
dered all enterprises of industry difficult, hazardous and ruinous in 
the extreme. The aggregate capital of the nation was probably on 
the decline; but the beneficial employment of it became still more 
rare as well as dangerous; so much so, that interest never fell so low 
in France as at that period; and, what is in general the sign of ex- 
treme prosperity, was then the efiect of extreme distress. 

These exceptions serve but to confirm the general and eternal law, 
that the more abundant is the disposable capital, in proportion to the 
multiplicity of its employments, the lower will the interest of bor- 
rowed capital fall. With regard to the supply of disposable capital, 
that must depend on the quantum of previous savings. On this 
head, I must refer to what I have before said upon the subject of the 
formation of capital. t 

* Weallh of Nations, book i. c. 9. 

I Supra, Book I. chap. 11. It has been remarked that the rate of interest is 
usually somewhat lower in towns, than in country places. Wealth of Nations, 
book i. c. 9. The reason is plain. Capital is for the most part in the hands of 
the wealthy residents of the towns, or at least of persons who resort to them for 
their business, and carry with them the commodity they deal in, i. e. capital, 
which they do not like to employ at much distance from their own inspection. 
Towns, and particularly great cities are the grand markets for capital, perhaps 
even more than for labour itself; accordingly, labour is there comparatively 
dearer than capital. In the country, where there is little unemployed capital, 
the contrary is observable. Thus, usury is more prevalent in country places; 
it would be less so, if the business of lending were more safe and in better 
repute, (a) | 

(a) These remarks are just in the main; but the advantage of town over coun- 
try, in this particular, may be reduced to a very trifle, by the ease of internal 
communication. In England the difference is scarcely perceptible. T. 
45 



354 ON DISTRIBUTION. book ii. 

If it be desired, that capital in search of employment, and indus- 
try in search of capital, should both be satisfied in the fullest man- 
ner, entire liberty of dealing must be allowed in all matters touching 
loans at interest. Disposable capital, being thus left to itself, will 
seldom remain long unemployed; and there is every reason to be- 
lieve, that as much industry will be called into activity, as the actual 
state of societ}^ will admit. 

But it is essential to pay a strict attention to the micaning of the 
term, supply of disposable capital; for this alone can have any 
influence upon the rate of interest; it is only so much capital, as the 
owners have both the power and the will to dispose of, that can be 
said to be in circulation. A capital already vested and engaged in 
production or otherwise, is no longer in the market, and therefore 
no longer forms a part of the total circulating capital; its owner is 
no longer a competitor of other owners in the business of lending, 
unless the employment be one, from which capital may be easily 
disengaged and transferred to other objects. Thus, capital lent to a 
trader, and liable to be withdrawn from his hands at a short notice, 
and, a fortiori, capital employed in the discount of bills of exchange, 
which is one way of lending among commercial men, is capital, 
readily disposable and transferable to any other channel of em- 
ployment, which the owner may judge convenient. 

Capital employed by the owner on his own account, in a trade 
that may be soon wound up, in that of a grocer for instance, stands 
nearly in the same predicament. The articles he deals in finds at all 
times a ready market, and the capital thus employed may be real- 
ized, repaid if lent, re-lent and re-employed in other trades, or applied 
to any other use. It is always either in actual circulation, or at least 
on the point of being so. Of all values, the one most immediately 
disposable is that of money. But capital embarked in the construc- 
tion of a mill, or other fabric, or even in a moveable of small dimen- 
sions, is fixed capital, which being no longer available for any other 
purpose, is withdrawn from the mass of circulating capital, and can 
no longer yield any other benefit than that of the product wherein it 
has been vested. Nor should it be lost sight of, that even though 
the mill or other fabric be sold, its value, as capital, is not by that 
means restored to circulation; it has merely passed from one pro- 
prietor to another. On the other hand, the disposable value, where- 
with the buyer has made the purchase, is not thrown out of circula- 
tion, having merely passed from his into the seller's hands. The 
sale neither increases nor diminishes the mass of floating capital in 
the market. Attention to this circumstance is essential to the form- 
ing a correct estimate of the causes, that determine the rate, as well 
of interest on capital, as likewise of profit accruing from capital 
employed, which we are about to consider presently. 

It has been sometimes supposed, that capital is multiplied by the 
operation of credit. This error, though frequently recurring in 
v»'orks professing to treat of political economy, can only arise from 
a total ignorance of the nature and functions of capital. Capital 



CHAP. VIII. ON DISTRIBUTION. 355 

consists of positive value vested in material substance, and not of 
immaterial products, which are utterly incapable of being accumu- 
lated. And a material product evidently can not be in more places 
than one, or be employed by more persons than one, at the same 
identical moment. The works, machinery, utensils, provisions, and 
stock in hand, composing the capital of a manufacturer, may possibly 
be wholly borrowed; in which case, he will be acting upon a hired 
capital, and not on one of his own; yet, beyond all question that 
capital can be made use of by no one else, so long as it remains 
within his control and management: the lender has parted with the 
power of otherwise disposing of it for the time. A hundred others 
might have equal security and credit to offer; but their applications 
could not multiply the volume of disposable capital, and could have 
no other effect than to prevent other capital from remaining idle and 
out of employ.* 

It is not to be expected, that I should here enter upon a compu- 
tation of the motives of affection, consanguinity, generosity, or 
gratitude, which may occasionally give rise to the loan of capital, or 
influence the amount of interest demanded for it. Every reader 
must take upon himself to appreciate the influence of moral causes 
upon the laws of political economy, which alone we profess to 
expound. 

To limit capitalists to the lending at a certain fixed rate only, is 
to set an arbitrary value on their commodity, to impose a maximum 
of price upon it, and to exclude, from the mass of floating or circu- 
lating capital, all that portion, whose proprietors can not, or will 
not, accept of the limited rate of interest. Laws of this description 
are so mischievous, that it is well they are so little regarded as they 
almost always are, the wants of borrowers combining with those of 
lenders, for the purpose of evading them; which is easily managed, 
by stipulating for benefits to the lender, not indeed bearing the name 
of interest, although really the same thing in the end. The only 
consequence of such enactments is, to raise the rate of interest, by 
adding to the risks, to which the lender is exposed, and against 
which he must be indemnified. It is somewhat amusing to find that 
those governments, which have fixed the rate of interest, have 

* Vide supra. Book I. chap. 10, 11, on the mode of employing, and on the 
transformation and accumulation of capital. What is here said does not militate 
against the positions laid down in Book I. chap. 22. on the representatives of 
inoney. A hill of exchange, with good names upon it, is only an expedient for 
borrowing of a third person actual and positive value, in the interim between 
the negotiation and the maturity of the bill. Bills and notes, payable on demand, 
or at sight, whether issued by the government, or by private banking-establish- 
ments are a mere substitution of a cheap paper agent of circulation, in the place 
of a costly and metallic agent. The monetary functions of the metal being exe- 
cuted by the paper, the former is set free for other objerts; and, inasmuch as it 
is exchano-eable for other commodities or implements of industry, a positive 
accessionls made by the substitution to the natural capital; but no further. The 
degree of the accession is limited strictly to the amount of value required for 
the business of circulation, and dispensed with by this expedient; which 
amount is a mere trifle, in comparison with the total value of the national capital. 



356 ON DISTRIBUTION. book ii. 

almost invariably themselves set the example of breaking their own 
laws, by borrowing at higher than legal interest in their own case. 

That interest should be fixed by law is highly proper and neces- 
sary; but it should be fixed only in cases, where there' is no previous 
agreement about it; as in the case of a legal recovery of a sum with 
interest. And, in such case, I think the interest fixed by law should 
be estimated at the lowest rate, that is usually paid by individuals; 
because the lowest rate is that paid by the safest investments. Now, 
it is quite consistent with justice, that the withholder of capital 
should restore it even with interest; but that is in the supposition, 
that it has remained all the while in his possession; which it can not 
be supposed to have done, without his having invested it in the way 
the least hazardous, and consequently without his having drawn 
from it at least the lowest interest it would have afforded. 

But this rate should not be denominated the legal interest, because 
the rate of interest ought no more to be restricted, or determined by 
law, than the rate of exchange, or the price of wine, linen, or any 
other commodity. And this is the proper place to expose a very 
prevalent error. 

Capital, at the moment of lending, commonly assumes the form 
of money; whence it has been inferred, that abundance of money is 
the same thing as abundance of capital; and, consequently, that 
abundance of money is what lowers the rate of interest. Hence the 
erroneous expressions used by men of business, when they tell us, 
that money is scarce, or that money is plentiful; which it must be 
confessed, are equally just and appropriate, as the very incorrect 
term, interest of money. The fact is, that abundance or scarcity of 
money, or of its substitute, whatever it may be, no more afiects the 
rate of interest, than abundance or scarcity of cinnamon, of wheat, 
or of silk. The article lent is not any commodity in particular, or 
even money, which is itself but a commodity, like all others; but it 
is a value accuniulated and destined to beneficial investment. 

A man, who is about to lend, converts into money the aggregate 
value he means to devote to that particular purpose; and the borrower 
no sooner has it at command, than he exchanges it for something 
else; the money that has effected this operation, forthwith served to 
effect other similar or dissimilar operations; the payment of a tax 
perhaps, or the subsidy of an army. The value lent has but for a 
moment assumed the form of money, in the same manner, as we have 
traced revenue received and expended, passing through the same 
temporary form; the identical pieces of money serving perhaps a 
hundred times in the course of a year, to transfer equivalent portions 
of income. So, likewise, the same sum of money, that has served 
to transfer a value from the hands of one lender into those of a bor- 
rower, may, after Infinite intervening transfers, perform the like 
office between a second borrow^er and lender, without stripping the 
fornier borrower of any part of the value he has received. In 
reality, then, it is value which has been borrowed, and not any par- 
ticular sort of metal or of merchandise. All kinds of merchandise 



CHAP. VIII. ON DISTRIBUTION. 357 

may be lent and borrowed, as well as money; nor does the rate of 
interest at all depend upon the quality of the object lent or borrowed. 
Nothing is more common in trade, than to lend and borrow other 
objects than money. When a manufacturer buys the raw material of 
his business at a certain credit, he in fact^ borrows the wool, or cotton, 
as the case may be, making use of the value of those materials in his 
concern; and their quality has no influence on the interest, with which 
he credits the seller.* The glut or scarcity of the commodity lent only 
affects its relative price to other commodities, and has no influence 
whatever on the rate of interest upon its advance or loan. Thus, 
when silver money lost three-fourths of its former relative value, 
although four times as much of it was necessary to pass a loan of the 
same extent of capital, the ratio of interest remained unaltered. 
The quantity of specie or money in the market, might increase ten- 
fold, without multiplying the quantity of disposable, or circulating 
capital, t 

Wherefore, it is a great abuse of words, to talk of the interest of 
money; and probably this erroneous expression has led to the false 
inference, that the abundance or scarcity of money regulates the rate 
of interest.^ Law, Montesquieu, nay, even the judicious Locke, in 
a work expressly treating of the means of lowering the interest of 
money, have all fallen into this mistake; and it is no wonder that 
others should have been misled by their authority. The theory of 

* Many loans on interest are made •without bearing that name, and without 
implying a transfer of money. "When a retail dealer supplies his shop by buy- 
ing of the manufacturer or wholesale dealer, he borrows at interest, and repays, 
either at a certain term, or before it, retaining the discount, which is but the 
return of the interest charged him in addition to the price of the goods. When 
a provincial dealer makes a remittance to a banker at Paris, and afterwards 
draws upon his banker, he lends to him, during the time that elapses between 
the arrival of the reiiiittance and the payment of the draft. The interest of this 
advance is allowed in the interest account which the banker annexes to the 
merchant's account current. In the Cours d'' Economic Politique, compiled by 
Starch, for the instruction of the young grand-dukes of Russia, and printed at 
Petersburgh, tom. vi. p. 103, we are informed, that the English merchants, or 
factors settled in Russia, sell to their customers at a credit of twelve months; 
which enables the Russian purchaser of current articles, to realize long before 
the day of payment, and turn the proceeds to account in the interim; thereby 
operating with English capital, never intended to be so employed. It is to be 
presumed, that the English indemnify themselves for this loss of interest, by 
the additional price of their goods. But the average rate of profit upon capital 
in Russia is so high, that even this round-about way of borrowing is sufficiently 
profitable to the native dealers. 

f This is no contradiction to th^ former position, that the precious metals 
form part of the capital of society. They form an item of capital, but not of 
disposable, or kndable capital; for they are already employed, and not in search 
of employment; — employed in the business of circulating value from one hand 
to another. If their supply exceed the demand for this object, they arc sent to 
other parts, where their price continues higher; if their general abundance lower 
their price every where, the sum of their value is not increased, but a larger 
quantity of them is given in exchange for the same value in other commodities. 
X If interest were always low in proportion to the greater supply of money, it 
would be lower in Portugal, Brazil, and the West Indies, than in Germany, 
Switzerland, &c. which is by no means the case. 



358 ON DISTRIBUTION. bookii. 

interest was wrapped in utter obscurity, until Hume and Smith* 
dispelled the vapour. Nor will it ever be clearly comprehended, 
except by such as shall have acquired a correct notion of what has, 
throughout this work, been denominated capital, and shall proceed 
in the conviction, that the object lent or borrowed, is not a particular 
commodity or object of merchandise, but a portion of value, — of the 
aggregate value of the capital available for that object; and that the 
per centage paid for the use of this portion of capital, at all times 
and places, depends on the relative supply and demand of capital to 
be lent, and is wholly independent of the specific form or quality 
of the commodity, wherein the loan is made, whether it be money, 
or any other article whatever. 



Section II. 
Of the Profits of Capital. 

We have now sufficiently considered the nature and motive of the 
interest paid by the borrower to the lender of capital, and, though 
it appears pretty plainly, that this interest is compounded of the rent 
of the capital, and of the premium of insurance against the risk of 
its partial or total loss, we have also seen enough, to comprehend 
the extreme difficulty of severing and distinguishing these two 
ingredients. 

Let us then proceed, in the next place, to investigate the causes of 
the profit derivable from the employment of capital, whether by a 
borrower or by the proprietor himself: to which end it will be 
necessary, in the outset, to sever it from the profit of the industry, 
that turns it to account; and here again we shall meet with the 
greatest difficult}^, in drawing the line of distinction; though it is 
easy to perceive, that these two classes of profit, generally speaking, 
are combined in the recompense or portion of the adventurer. Smith, 
and most of the English writers on this science, have omitted to 
notice this distinction; they comprise under the general head of the 
profit of capital, or stock, as they term it, many items, which evi- 
dently belong to the head of the profit of industry.! 

* Essays of D. Hume, part ii. ess. 4. Wealth of Nations, book ii. c. 4. It 
is well for the student in political econonniy, that Locke and Montesquieu have 
not written more upon it; for the talent and ingenuity of a writer serve only to 
perplex a subject he is not thoroughly acquainted with. To say the truth, a 
man of lively wit can not satisfy his own mind without a degree of speciousness 
and plausibility, which is of all things the most dangerous to the generality of 
readers, who are not sufficiently grounded in principle to discover an error at 
first sight. In those sciences, which consist in mere compilation and classifica- 
tion, as in botany or natural history, one can scarcely read too much; but in 
those dependent upon the deduction of general laws from particular facts, the 
better course is to read little, and select that little with judgment. 

t This omission is justified by Smith, on the following grounds. " Let us 
suppose," says he, " that in some particular place, where the common annual 



CHAP. VIII. ON DISTRIBUTION. 359 

Perhaps an approximation may be made to the accurate apprecia- 
tion of that part of the aggregate profit, which appertains to the 
capital, and that, which appertains to the industry employing it, 
respectively, by comparing the mean ratio of total profit with the 
mean ratio of the difference of profit in the same line of business, 
which seems a fair index of the difference of the skill and labour 
engaged. We will suppose two houses, in the fur trade for example, 
to work each upon a capital of 100,000 dollars, and to make on the 
average, an annual profit, the one of 24,000 dollars, the other of 
6000 dollars only; a difference of 18,000 dollars fairly referable to 
the different degree of skill and labour, the mean of which is 9000 
dollars; this may be considered as the gains of industry, which, de- 
ducted from 15,000 dollars, the mean profit of the trade, will leave 
6000 dollars for the profit of the capital embarked in it. 

This example I could suggest as a means, rather of distinguishing 
those items of profit thus mixed up together, than of estimating 
their respective ratio with any tolerable certainty. But, without 
any index to the precise line of demarkation between the profits of 
capital and those of the industry employing it, we may take it for 
granted, that the former will always be proportionate to the risk of 
partial or total loss, and to the duration of the employment In 
practice, adventurers, having capital at their command, always weigh 
beforehand the advantages and disadvantages of the different modes of 
investment, as specified above,* and naturally prekr, ceteris paribus, 
those presenting the smallest risk and the quickest return; so that 
there is less competition of capital for hazardous and long-winded 
adventurers; indeed, none whatever is embarked in them, unless 
they hold out a rate of profit so much above the average rate, as to 
tempt the capitalist to run the risk. Theory, therefore, leads to the 
presumption, which is confirmed by the test of experience, that the 
profit of capital is high, in proportion to the hazard of the adventure, 
and to the length of its duration. 

When a particular employment of capital, the trade with China, 

profits of a manufacturing stock are 10 per cent, there are two different manu- 
factures, in one of which the coarse materials annually wrought up cost only 
700/., while the finer materials in the other cost 7000/. If the labour in each 
cost 30CZ. per annum, the capital employed in the one will amount only to 1000/.; 
whereas that employed in the other will amount to 7,300/. At the rate of 10 
per cent, therefore, the undertaker of the one will expect a yearly profit of 100/. 
only, and that of the other 730/.;" and he goes on to infer, " that the profit is in 
proportion to the capital, and not to the labour and skill of inspection and direc- 
tion." But the instance put is altogether inconclusive; and it is equally easy to 
suppose the case of two manufactures, carried on in the same place, and in the 
same line, each with an equal capital of 1000/. the one under the conduct of aa 
active, frugal, and intelligent manager, the other under that of an idle, ignorant, 
and extravao-ant one; the former yielding a profit of 150/. per annum, the latter 
one of 50/. only. The difference in this case will arise, not from any difference 
in the respective capitals employed, but from the difference in the skill and in- 
dustry employing them; which latter qualities will be more productive in the 
one instance than in the other. 
* Book II. chap. 7. sect. 3. 



360 ON DISTRIBUTION. book ii. 

for instance, does not afford a profit proportionate, not only to the 
time of the detention, but likewise to the danger of loss, and the 
inconvenience of a long, perhaps a two years' duration of one single 
operation before the returns come to hand, a proportion of the capital 
is gradually withdrawn from that channel ; the competition slackens, 
and the profits advance, until they rise high enough to attract fresh 
capital. * 

This will serve also to explain, why the profits, derivable from 
a new mode of employment, are larger than those of common and 
ordinary employments, where the production and consumption have 
been well understood for years. In the former case, competition is 
deterred by the uncertainty of success j in the latter, allured by the 
security of the employment. 

In short, in this matter, as in all others, where the interests of 
mankind clash one with another, the ratio is determined by the re- 
lative demand and supply for each mode of employment of capital 
respectively. 

It is a maxim with Smith and those of his school, that human la- 
bour was the first price, — the original purchase-money, paid for all 
things. They have omitted to add, that for every object of pur- 
chase, there is, moreover paid, the agency and co-operation of the 
capital employed in its production. Is not capital itself, they will 
say, composed of accumulated products, — of accumulated labour? 
Granted: but the value of capital, like that of land, is distinguishable 
from the value of its productive agency; the value of a field is quite 
different from that of its annual rent. When a capital of 1000 dol- 
lars is lent, or rather lent on hire, for a year, in consideration of 50 
dollars more or less, its agency is transferred for that space of time, 
and for that consideration; besides the 50 dollars, the lender re- 
ceives back the whole principal sum of 1000 dollars, which is ap- 
plicable to the same objects as before. Thus, although the capital 
be itself a pre-existent product, the annual profit upon it is an en- 
tirely new one, and has no reference to the industry, wherein the 
capital originated. 

Wherefore when a product is ultimately completed by the aid of 
capital, one portion of its value must go to recompense the agency 
of the capital, as well as another to reward that of the industry, that 
have concurred in its production. And the portion so applied is 
wholly distinct from the value of the capital itself, which is returned 
to the full amount, and emerges in a perfect state from its produc- 
tive employment. Nor does this profit upon capital represent any 
part of the industry engaged in its original formation. 

From all which it is impossible to avoid drawing this conclusion, 

* To say nothing of the other motives, that attract industry towards any par- 
ticular profession or repel it thence, which have been noticed in the preceding 
chapter. These motives sometimes operate all in the same direction, and then 
the profits of both industry and capital rise or fall together; when they act in 
opposite directions, the difference on the profit of capital balances that on the 
profit of industry; or vice versa. 



CHAP. VIII. ON DISTRIBUTION. 361 

that the profit of capital, like that of land and the other natural 
sources, is the equivalent given for a productive service, which 
though distinct from that of human industry, is nevertheless its effi- 
cient ally in the production of wealth. 



Section III. 
Of the Employments of Capital most beneficial to Society. 

To the capitalist himself, the most advantageous employment of 
capital is thnt, which with equal risk yields the largest profit; but 
what is to him most beneficial, may perhaps not be so to the com- 
munity at large; for capital has this peculiar faculty, that, besides 
being productive of a revenue peculiar to itself, it is, moreover, a 
means, whereby land and industry may generate a revenue like- 
wise. This is an exception to the general principle, that what is 
the most productive to the individual, is so to the community at 
large. A capital lent to a foreign country, may very probably pro- 
duce to the proprietors and the nation, the highest possible rate of 
interest; but can afford no assistance towards extending the revenue 
of the national territory, or for the national industry, as it would 
do, if employed within the pale of the nation. 

The portion of capital embarked in domestic agriculture is em- 
ployed best for the interests of a nation; it enhances the productive 
power of the land and of the labour of a country. It augments at 
once the profits of industry and those of real property. Capital em- 
ployed under intelligent direction, may make barren rocks to bear 
increase. The Cevennes, the Pyrennees, and the Pays de Vaud, 
present on every side the view of mountains, once a scene of unva- 
ried sterility, now covered with verdure and enriched by cultiva- 
tion. Parts of these rocks have been blasted with gunpowder, and 
the shivered fragments employed in the construction of terraces one 
above another, supporting a thin stratum of earth carried thither by 
human labour. In this manner is the barren surface of the rock 
transformed into shelving platforms, richly furnished with verdure, 
and teeming with produce and population. The capital ori<ginally 
expended in these laborious improvements might, perhaps, have 
produced larger profits to the capitalist, if employed in external 
commerce; but probably the total revenue of the district would have 
been inferior in amount. 

For a similar reason, capital cannot be more beneficially em- 
ployed, than in strengthening and aiding the productive powers of 
nature. Well contrived and useful machinery produces more than 
the interest of its prime cost; and besides afibrding additional profit 
to the proprietor, benefits the consumer and the community at large, 
to the full extent of the saving effected by its means; for every 
thing saved is so much gain. 

The productive employments, that rank next in point of national 
46 



362 ON DISTRIBUTION. bookii. 

benefit, are those of manufacture and internal commerce; for the 
profits of the industry they set in motion are earned at home; 
whereas, capital embarked in foreign trade benefits the industry 
and natural resources of all nations indiscriminately. 

The employment of capital, that tends least to the national advan- 
tage, is the carrying trade between one foreign country and another. 

When a nation is possessed of an immense accumulation of capi- 
tal, it will do well to embark it in all these difierent channels of 
industry; for they are all lucrative, and in nearly equal degree to 
the capitalist, though in very different degrees to the nation at large. 
What prejudice can arise to the lands of Holland, which are already 
in a high state of cultivation and management, and want neither 
clearing nor enclosing, or what injury be sustained by nations pos- 
sessed of little territory, like the old states of Venice, Genoa, and 
Hamburg, from the large investments of national capital in the car- 
rying trade? It flowed into that particular channel of employment, 
merely because thei^e was no other open to it. But that class of 
trade, and generally all external commerce, is ill adapted to a nation 
deficient in capital, and having not enough to keep its agriculture 
and manufacture in activity; and it would be absurd for its govern- 
ment to give premature encouragement to those external branches 
of industry; for such a measure would but check the employment 
of capital in the manner best calculated to increase the national re- 
venue. China, though it is the largest empire in the world, and 
must possess the greatest aggregate revenue, since it maintains the 
most numerous and dense population, abandons to foreigners almost 
all its external commerce. Undoubtedly, in her present condition, 
she would be a gainer by extending her external relations of com- 
merce; but she affords a very striking example of the prosperity 
attainable without them. 

It is very fortunate, that the natural course of things impels 
capital rather into those channels, which are the most beneficial to 
the community, than into those, which afford the largest ratio of 
pi-ofit. The investments generally preferred are those that are 
nearest home; whereof the first and foremost is the improvement 
of the soil, which is justly considered the most safe and permanent; 
the next, manufacture and internal commerce; and the last of all, 
external commerce, the trade of transport, and the commerce with 
distant nations. The owner of a capital, especially of a moderate 
one, will embark it rather under his own superintendence, than in 
distant and remote concerns. He is apt to think his risk too hazard- 
ous, when he loses sight of his property for any considerable length 
of time, when he consigns it to strangers, or can expect only tardy 
returns, or is exposed to the chances of litigation with fraudulent 
'debtors, who may take advantage of their unsettled habits of life, 
or of the laws of foreign countries, with which he is himself unac- 
quainted. Nothing, but the bait of exclusive privilege and monopoly- 
profit, or the violent derangement of internal industry, can induce 



^HAP. IX. ON DISTRIBUTION. 363 

an European nation, not possessed of a large surplus capital^ to engage 
in the colonial or East India trade.(l) 



CHAPTER IX. 

OF THE REVENUE OF LAND. 

Section I. 

Of the Profit of Landed Projierty."* 

Land has the faculty of transforming and adapting to the use of 
mankind an infinity of substances, which, without its intervention, 

* In the preceding chapter, I have given the interest, precedence of the profit, 
of capital, because the former helps to render the latter more intelligible. I have 
here adopted a contrary arrangement, because the consideration of the profit of 
land elucidates the subject of rent. 

(1) [The reasoning of this whole section appears to me, to be unsoutid and 
inconclusive. There is no distinction in point of productiveness, between any 
of the various employments of capital. There can, in short, be no line drawn 
between the different productive channels, into which capital may be directed. 
"Whatever occupations tend to supply the wants and increase the comforts and 
accommodations of life, are, in the strictest sense of the word, equally produc- 
tive, and nearly in the same proportion augment the national wealth. The cap- 
ital employed in the carrying trade between one foreign country and another is 
as advantageous to the individual and nation to which it belongs, as the capital 
employed at home. For, as has been already remarked in relation to the profits 
of industry (vide note page 6) in the absence of all restraints, the profits of all 
the different employments of capital, will be on an equality or nearly approaching 
it, inasmuch as any material difference will cause its diversion to a more pro- 
ductive channel, and thus restore the^^equilibrium. In a word, capital flows into 
the carrying trade only because it yields a greater profit than it otherwise would 
do, did it not take that direction. 

Moreover, there is no exception to the general principle, that what is most 
productive to the individual is not so to the community at large. Notwithstanding 
the contrary assertion of our author, in the foregoing section, a capital lent to, 
or employed in, a foreign country, if it yield to the proprietors and nation the 
highest rate of interest, must necessarily afford the national revenue as much, 
and extend the same assistance to the national industry, as if it were employed 
within the pale of the nation. If, for example, a capital lent abroad, give em- 
ployment to foreign industry and natural agents, it is because its productive 
service, when things, I must again repeat, are left to take their natural course, 
will yield a larger revenue to its owners. Were not this the case, this capital 
would not seek employment abroad, but remain at home. The revenue produced 
by capital employed abroad, if the proprietor does not himself at the same time 
emigrate there, must be the means of calling into activity, and giving a greater 
development to the productive faculties of the national industry and land, as 
this revenue must be consumed, either productively or unproductively at home.] 

American Editor. 



364 ON DISTRIBUTION. book ii. 

would be to them of no service; it yields nutriment and vegetative 
juices to the grain, the fruits, and vegetables, whereon we subsist; as 
well as to the forests, whereof we construct our houses, ships, and 
furniture, and whence we derive fuel to keep us warm. Its agency 
in the production of all these commodities may be called, the pro- 
ductive service of land. And thence it is, that the profit of the 
proprietor originates. 

He derives a further benefit from the useful substances to be 
extracted from its entrails; the stone, metal, coal, peat, &c. &c. 

Land, as we have above remarked, is not the only natural agent 
possessing productive properties; but it is the only one, or almost 
the only one, which man has been able to appropriate, and turn to 
his own peculiar and exclusive benefit. The water of rivers and of 
the ocean has the power of giving motion to machinery, affords a 
means of navigation, and supply of fish; it is, therefore, undoubtedly 
possessed of productive power. The wind turns our mill; even the 
heat of the sun co-operates with human industry; but happily no 
man has yet been able to say, the wind and the sun's rays are mine, 
and I will be paid for their productive services. I would not be 
understood to insinuate, that land should be no more the object of 
property, than the rays of the sun, or blast of the wind. There is 
an essential difference between these sources of production; the 
power of the latter is inexhaustible; the benefit derived from them 
by one man does not hinder another from deriving equal advantage. 
The sea and the wind can at the same time convey my neighbour's 
vessel and my own. With land it is otherwise. Capital and indus- 
try will be expended upon it in vain, if all are equally privileged 
to make use of it; and no one will be fool enough to make the 
outlay, unless assured of reaping the benefit. Nay, paradoxical as 
it may seem at first sight, it is, nevertheless, perfectly true, that a 
man, who is himself no share-holder of land, is equally interested 
in its appropriation with the share-holder himself. The savage tribes 
of New Zealand, and of the north-western coast of America, where 
the land is unappropriated, have the greatest difficulty in procuring 
a precarious subsistence upon fish and game, and are often reduced 
to devour worms, caterpillars, and the most nauseous vermin:* not 
unfrequently even to wage war on one another, from absolute want, 
and to devour their prisoners as food; whereas, in Europe, where 
the appropriation is complete, the meanest individual, with bodily 
health, and inclination to work, is sure of shelter, clothing, and sub- 
sistence, at the least. 

In preceding chapters, we have noticed the profit resulting from 
industry and capital, embarked in agriculture or other branches of 
industry. In the present, we are to inquire, wherein consists the 
peculiar profit of land itself, independent of that accruing from the 
industry and capital, devoted to its cultivation; and to consider the 

* Malthus, in his Essay on Population, book i. c. 405, has given a detail of 
some of the revoking extremes, to which savage tribes have been reduced by 
the want of a regular supply of food. 



CHAP. IX. ON DISTRIBUTION. 365 

profit of land in the abstract, and whence it originates, without any 
inquiry as to who may be the cultivator, whether the proprietor 
himself, or a tenant under him. 

It is the declared opinion of many writers,* that the value of 
products is never more than the recompense of the human agency 
engaged in their production; consequently, that there is no residue 
or surplus, that can be set apart as the peculiar profit of land, and 
constitute the rent paid for its use to the proprietor. The tenor of 
their argument is this: the proprietor of land lying waste or fallow, 
having also a capital to dispose of, may at his pleasure, expend it, 
either in cultivation, or in some other way. If he reckons that the 
cultivation of his land will yield him as large a return as any other 
investment, he will give it the preference; and, indeed, it is found 
by experience, that this mode of investment is preferred, even 
though somewhat less advantageous than others, as being at all 
events more safe. Well: and what do they infer from this? Why, 
that cultivation yields no return whatever, beyond the interest of 
the capital engaged in it;t and if so, what is there left for the profit 

* Destutt de Tracy. Commentaire sur V Esprit de Lois, c. 13. Ricardo(o) 
Prin. of Pol. Econ. and Tax. c. 2. 

I According to these writers, even the interest of capital is not given as the 
recompense of its concurrence in the business of production. I have already 
exposed the fallacy of this opinion, supra, chap. 8, sect. 2. 



(a) This chapter of Ricardo is perhaps the least satisfactory and intelligible 
of his whole work. It goes upon the principle detailed by Malthus, in his 
Essay on Bent; viz. that the ratio of rent is determined by the difference in the 
product of land of different qualities, the worst land in cultivation yielding no 
rent at all. But there is a great deal of land yielding rent without any cultiva- 
tion; and, in a country, where the whole of the land is appropriated, none is ever 
cultivated without paying some rent or other. The downs of Wiltshire yield a 
rent, without any labour, or capital, being expended upon them; so likewise the 
forests of Norway; this rent is the natural product of the soil; it is paid for the 
perception of that natural product, between which, and the desire for it, an arti- 
ficial difficulty is interposed by human appropriation. The whole rent is, there- 
fore, referable, not to the quality of the land only, but to the quality jointly with 
the appropriation; and so it is in all cases. Wherever a difficulty is thus inter- 
posed, rent will be paid upon all land brought into cultivation; for why should 
the proprietor part with the temporary possession for nothing, any more than 
the capitalist with his capitall And the ratio of rent is determined, not alto- 
gether by the quality of the soil, but by the intensity — 1. Of the desire, or demand 
for its productive agency; 2. Of the artificial difficulty interposed by nature and 
human appropriation. The quality of the soil may vary the intensity of the 
demand for it beyond all question; for the quality is the productive agency: but 
the supply of agricultural industry and capital in the marLet will also vary the 
proportion of its product, which industry and capital will expect for themselves. 
Why is rent highest, when a population is condensed on a limited territorial 
enrfacel because then the utility of its productive qualities is more strongly felt 
and desired, in consequence of the intense difficulty of their attainment. And 
why is rent still further raised by the prohibition of the import of products of 
external agriculture? Because the natural difficulty of obtaining the benefit of 
the productive agency of foreign land is aggravated, by the artificial difficulty 
interposed by legislative enactments. The degree of productive agency, of 
course affects the amount of the product; but rent originates in the union of that 
agency, or utility, with difficulty of attainment, natural and artificial, and is 
regulated in its ratio by their combined intensity. T. 



366 ON DISTRIBUTION. bookii. 

of the productive powers of the soil? Evidently nothing whatever. 
I have endeavoured to put the argument in the clearest and most 
intelligible light; and I have to observe upon it, that it proceeds 
upon a partial and imperfect view of the matter, and upon a total 
neglect of the influence of demand in the fixation of value. I will 
now endeavour to give a more complete view of the subject. 

The productive power of the soil has no value, unless where its 
products are objects of demand. Travellers, who have explored the 
interior of America, and other desert parts of the globe, make 
repeated mention of tracts of the richest land, capable of every kind 
of culture, yet wholly destitute of any useful or valuable products. 
But no sooner is a colony established in the vicinity, or, by some 
means or other, a market found where the products of the soil will, 
in the way of exchange, pay the usual rate of interest upon the 
requisite advances, than cultivation begins immediately. Up to this 
point, there is no difference between us. But if any circumstance 
operate to aggravate the demand beyond this point, the value of 
agricultural products will exceed, and sometimes very greatly ex- 
ceed, the ordinary rate of interest upon capital; and this excess it is, 
which constitutes the profit of land, and enables the actual cultiva- 
tor, when not himself the proprietor, to pay a rent to the proprietor, 
after having first retained the full interest upon his own advances, 
and the iiill recompense of his own industry. 

Land is an agent gratuitously furnished to mankind at large, by 
whom it is afterwards exclusively appropriated; but its appropria- 
tion does not begin to be profitable to the individual, in whose 
favour it is made, until its products are an object of demand, and 
until their supply ceases to be co-extensive with the desire for 
them, as it is with respect to some other natural objects, air, wa- 
ter, &c. 

From those products of the soil only, thus raised in value by the 
demand, can there accrue that profit to the proprietor, which has 
been called the profit of land ; and which is paid in all civilized coun- 
;tries, and especially where manufacture and commerce multiply the 
•objects of exchange. It may sometimes happen, that in a particu- 
lar district of such a country, the rent of land may be very trifling; 
as in our own district of Sologne, where it is no more than 20 cents 
an acre; but this is owing to the want of roads, and particularly of 
water-carriage, which makes the charge of bringing its agricultural 
produce to market, added to the charge of cultivation, absorb nearly 
the whole value it will there sell for. In some countries, highly 
civilized and productive in the extreme, land pays no more than 3 
or 4 per cent upon its price or purchase-money. Yet, this is no 
proof of the poverty of the soil; it proves only, that it sells dear. A 
landed estate may yield 24 dollars the acre, and require very little ex- 
pense of cultivation; as if it be laid down in pasture, for instance; in such 
case it must owe most of its value to its natural properties; yet, if it 
have cost the proprietor 800 dollars the acre, it will yield a return of 
3 per cent only. And herein consists the difierence between the 
profit and the rent of land: profit is high or low, according to the 



CHAP. IX. ON DISTRIBUTION. 367 

quantum of the product; rent, according to the quantum of the pur- 
chase-money or price. An acre of land, yielding a profit of one 
dollar only, will bring as high a rent as an acre yielding a profit of 50 
dollars, if 50 times as much has been paid for the one as for the other. 

Whenever land is bought with capital, or capital with land, occa- 
sion is given for a comparison of the returns of the one species of 
property with the returns of the other. It is possible, that an estate, 
bought with a capital of 100,000 dollars, may produce but 3 or 4000 
dollars per annum, whilst the same amount of capital would yield 5 
or 6000 dollars. The lower rate of interest, which the proprietor is 
content to take on a puEchase of land, may be attributed, in the first 
place, to the superior stability of the investment. Capital can sel- 
dom be made productive, without undergoing several changes both 
of form and of place, the risk of which is always more or less alarming 
to persons unaccustomed to the operations of industry; whereas, on 
the contrary, landed property produces without any change of either 
quality or position. The satisfaction and pleasure attached to terri- 
torial possession, the consideration, weight, and dignity it communi- 
cates, and the titles and privileges with which it is in some countries 
accompanied, contribute greatly to increase this natural preference. 

It is true, that land is more exposed than other property to the 
burden of public taxation, and to the arbitrary exactions of power, 
precisely because it can neither be removed nor concealed, A float- 
ing capital may take any shape whatever, and be removed at will. 
It can escape tyranny and civil commotions more readily, than even 
the person of its proprietor. It is a safer object of property; for it 
is often impossible to attach it, or to make it specifically responsible 
for the debts of the proprietor. Moreover, it is much less exposed 
to litigation than landed property. Yet, it is clear, that all these 
advantages are more than counterpoised by the superior risk of 
investment; and, that landed property is still preferred to floating 
capital; since land is dearer, in proportion to its annual returns. 

Whatever may be the exchangeable price of land and capital one . 
to the other, it is proper to observe, that their interchange makes no 
variation in the supply of productive agency of land and capital 
respectively in circulation, and disposable for the purpose of pro- 
duction; consequently, that exchangeable price can nowise affect the 
real and positive profit of land and of capital. When Richard sells 
his estate to Thomas, the productive service of the land is at the dis- 
posal of Thomas instead of Richard; and that of the capital, given 
in exchange for it, is at the disposal of Richard instead of Thomas. 

The only thing, which really varies the amount of productive 
agency of land in circulation, is the actual amelioration of the soil, 
by clearing and bringing new land into cultivation, or enlarging the 
productive power of old land, and thus increasing its product. 
Savings and accumulations of capital are, in the shape of agricultural 
improvements, transformed into landed property, and made to par- 
ticipate in all the peculiar advantages and disadvantages attached to 
it. The same may be said of houses, and generally of all capital . 



368 ON DISTRIBUTION. book ii. 

invested in a fixed and permanent object; it thenceforth loses the 
character of capital, and assumes that of landed property. 

Whence we may draw this invariable maxim; that the productive 
agency of land is possessed of value, which value, like value in gene- 
ral increases in the direct ratio of the demand, and the inverse ratio 
of the supply; and that, since land differs as much in quality, as in 
site and posftion, there is a peculiar demand and supply for each^^ 
peculiar quality. A demand for so much wine, more or less, what- ' 
ever it arise from, creates a specific demand for as much productive 
agency of the soil, as may be requisite for its growth;^ and the 
extent of surface, adapted to the culture of the grape, determines the 
supply of that productive service. If the'soil, capable of growing 
good wine, be very limited in extent, and the demand for such wine 
very brisk, the profit of the soil itself will be extravagantly high. 

It is worthy of remark, that all land, that yields any profit at aH, 
however trifling the amount, even so little as 20 cents the acre, or 
even less, may be kept in a state of cultivation: and there have been 
many instances of its cultivation under such circumstances. Herein 
it differs from capital and industry. A labourer, if he finde himself 
settled in a place, where his labour does not yield him what he has 
reason to expect, can migrate to another. So, likewise, capital quickly 
flows from a channel, that afi'ords a less, to one that afibrds a greater 
return. But land has not the same facilities: it is of necessity 
immoveable; consequently, out of its gross product, after the deduc- 
tion in the first instance of all advances of capital, with interest, as 
well as of the profits of industry, without which there could be no 
product whatever, there still remains to be deducted the expense of 
carrying the product to the market, or place of exchange. When 
these several deductions absorb the whole product of the land, the 
land itself yields no profit at all, and the proprietor can never suc- 
ceed in getting a rent from it. Even if he cultivate himself, he can 
only gain a profit on his capital and industry, but will receive none 
whatever from the bare ownership of the land. In Scotland, there 
are tracts of unproductive land thus cultivated by the proprietors, 
which it would not answer for any one else to undertake. So, like- 
wise, in the back settlements of the United States, there are tracts of 
great extent and fertility, ^yhose revenue alone would not maintain 
the proprietors; yet they are, nevertheless, cultivated with success: 
but it is by the proprietors themselves, who consume the product at 
the place of growth, and are obliged to superadd to the profit of the 
land, vv'nich is little or nothing, the further profit of capital and per- 
sonal industry, which afford a handsome competency. 

It is obvious, that land, though in a state of cultivation, yields no 
profit, when no farfner will pay rent for it, which is a convincing 
proof that it gives no surplus, after allowing for the profit of the capi- 
tal and industry requisite for its cultivation. 

In the instance just mentioned, the eiXect is occasioned by the dis- 

* As ■W'ell as a demand for the capital and industry requisite for the cultivation. 



CHAP. IX. ON DISTRIBUTION. 369 

tance of the market; the expense of transport swallows up the profit, 
which might otherwise be made of the land. Other instances might 
be adduced, in which badness of seasons, war, or taxation, have pro- 
duced the same effect, and partially or totally absorbed the profit of 
land, and thus thrown it out of cultivation,* 



Section II. 
Of Rent. 

When a farmer takes a lease of land, he pays to the proprietor the 
profit accruing from its productive agency, and reserves to himself, 
besides the wages of his own industry the profit upon the capital he 
embarks in the concern; which capital consists in implements of 
husbandry, carts, cattle, &c. He is an adventurer in the business of 
agricultural industry; and, amongst the means he has to work with, 
there is one that does not belong to him, and for which he pays rent, 
i. e. the land. 

The preceding section was occupied in explaining the source of 
the profit of land. Its rent is generally fixed at the highest rate of 
that profit, and for the following reason. 

Agricultural adventure requires, on the average, a smaller capi- 
tal,(a) in proportion, than other classes of industry, reckoning the 
land itself as no part of the capital of the adventurer. Wherefore, 
there is a greater number of persons able, from their pecuniary cir- 
cumstances, to embark in agricultural, than in any other speculations; 
consequently, a greater competition of bidders for land upon lease. 
On the other hand the quantity of land fit for cultivation is limited 
in all countries; whereas the quantity of capital and the number of 
cultivators have no assignable limitation. Landed proprietors, 
therefore, at least in those countries which have been long peopled 
and cultivated, are enabled to enforce a kind of monopoly against 
the farmers. The demand for their commodity, land, may go 
on continually increasing; but the quantity of it can never be 

This circumstance is equally applicable to the nation at large, and 
to each particular province or district. The number of acres to 
be rented in each province is incapable of extension; whilst the 

* This catalogue of adverse circumstances, all bearing more strongly upon 
the profit of land, than upon that of other sources of revenue, explains the fre- 
quent and unavoidable remission of rent to the farmer, and proves the accuracy 
of M de Sevitrne's iudirment, when she writes from the country:—" 1 wish my 
son could conTe here and convince himself of the fallacy of fancying oneself 
possessed of wealth, when one is only possessed of land." Lettre 224. 

(a) This is not universally true. In England, where agriculture has attained 
a hiffh degree of perfection, arable farms require much larger capitals than for- 
merly; and a farmer is commonly a much richer man, than the majority of the 
tradesmen in his neighbourhood. T. 
47 



370 ON DISTRIBUTION. 



BOOK II. 



number of persons in a condition to rent them has no fixed and 
absolute limit. 

Whenever this is the case, the bargain between the land-holder 
and the tenant must always be greatly in favour of the former; and, 
whenever there is any portion of the soil, which yields to the 
latter more than the interest of his capital and the wages of his 
industry, a higher bidder will soon off'er himself. The liberality 
ol a lew proprietors, the distance at which they happen to reside, 
the Ignorance of others, and even of the farmers themselves, and 
the imprudence of a few more, may sometimes operate to depress 
the ratio of rent below the maximum of profit; but these are acci- 
dental circumstances, which act for a season only, and can never 
prevent the regular and constant action of natural causes, which 
must in the end prevail. 

Besides this advantage accruing to the land-holder, derived from 
the very nature of things, he has likewise in general the advantage 
ot possessing, or being able to accumulate greater wealth, and 
sometimes credit, patronage and influence, into the bargain: but the 
ftrst advantage is alone sufficient to insure him the sole benefit of 
any circumstances, that may happen to enhance the profit of land. 
Ihe opening of a canal or road, the increase of population, wealth, 
and affluence in the province, always operate to raise his rent. He 
also benefits by every improvement in the cultivation; for a man 
can afibrd to pay dearer for the hire of an instrument, when he 
knows how to turn it to better account. 

When the proprietor himself expends a capital in the improve- 
ment oi his land, in draining, irrigation, fences, buildings, houses, 
or other erec ions, the rent then includes, in addition to the profit 
ol the land, the interest likewise of the capital so expended.* 
IJornfL T"" ^Tl ?^^t™^« undertake these expenses of ame- 
on til o r^'i' -^"^ \^ ''" °"'^ ^^^^"^^^^^ °" receiving interest 
iLnf u I i"''u^ *^^ continuance of his lease: at the expira- 
ion of which, the benefit must devolve to the land-holder, being 
hP wKnir^ fif ''^•.f'"°?'= thenceforward the landlord derive! 
tr^y P'°^^' ^^*^°"^ ^'^^"S ^^de any of the advances: for 
he receives a proportionate increase of rent in consequence. The 
eZu ^^^^'t^^^f-re^ engage only in those improvements whose 
effects will last no longer than his lease; unless the lease belong 

the Ih'o r r '^? "^'f '"^^"S ^''"^ ^^' i-provements to repa| 
twTnn 1 ^^' ^"S"*^'"'. '"''^^ *^^ ^"terest.' It is in this way^ 
s ev "ent tt'^ff^T'-n'r^r^^" '^^ P^^^"^^ ^^ '^^ ^-"d; and T 
bvt^enronHpf v"^ 1.^^^ greatest, when the land is farmed 
to^o e fbP^hP /. r^'^u' ^T ^' ^' ^"' ^^'' ^'^'^^y^ than the farmer, 
Vields h m f '"'^ '^r*^'^' every judicious improvemen 

l^lt T .uP^f^'f .^"i P'°^*' ^"^ the original outlay is amply 
repaid, when the land is finally disposed of. The farmer's certainty 

varue^ttn?hflan7i!splf'" ^/^P^^.^e^jents upon land, is sometimes of greater 
« man ine land itself. This is the case with dwelling-houses. 



CHAP. IX. ON DISTRIBUTION. 371 

of reaping the advantage till the end of his lease is equally conducive 
to the improvement of landed property with the length of leases. 
On the contrary, such laws and customs, as authorize the cancelling 
of leases in specified cases, as in case of sale by the proprietor, are 
highly prejudicial to agriculture; since the farmer will hardly 
venture to undertake any considerable improvement, if kept in 
continual fear of seeing an intrusive successor appropriate the 
recompense of his ingenuity, labour, and capital. In fact, every 
improvement he should make would but increase the risk of that 
injustice; for land is far more saleable in good condition than 
otherwise. 

Leases are no where more sacredly regarded than in England; 
and the privilege, enjoyed by leasees to the amount of 405. (about 
10 dollars) and upwards, of voting at Parliamentary elections, has, 
in some measure, restored the equipoise of power and influence 
between landlords and tenants, which seldom exist in practice. 
In no other country do we see tenants so confident of undisturbed 
possession, as to build upon ground held on lease. Such tenants 
improve the land, as if it were their own; and their landlords are 
punctually paid; which is less frequently the case elsewhere. 

The land is sometimes cultivated by persons possessed of no 
capital whatever, the proprietor furnishes himself the requisite 
capital, as well as the land. They are called in France, metayers, 
and commonly pay to the landlord half the gross product. This 
arrangement is to be met with only in the infancy of agriculture, 
and is of all others the least conducive to improvement; for the 
party who bears the expense of amelioration, whether landlord or 
tenant, makes the other a gratuitous present of half the interest on 
his advances. This kind of tendency was more common in the 
feudal times, than it is at present. The lords were above tilling 
the land themselves, and their vassals had not the means. The 
largest incomes were then derived from the land, because the lords 
were large proprietors; but they bore no proportion to the extent 
of the land. Nor was this owing to the defect of agricultural skill, 
so much as to the scarcity of capital devoted to improvements. The 
lord felt little anxiety to improve his property, and expended, in a 
way more liberal than productive an income that he might easily 
have tripled. He levied war, gave feasts and tournaments, and 
maintained a numerous retinue. If we look at the then degraded 
condition of commerce and manufacture, superadded to the insecu- 
rity of the agricultural interest, we need go no further for the expla- 
nation of the reason, why the bulk of the community was in the 
extreme of indigence; and why independently of every political 
cause, the nation itself was weak and impotent. Five deparUiients 
would not be able to repel attacks, which overwhelmed all ]< ranee 
at that period: but happily for her, the other states of Europe were 
nowise in a better condition. 



372 ON DISTRIBUTION. 



BOOK II. 



CPIAPTER X. 

OF THE EFFECT OF REVENUE DERIVED BY ONE NATION FROM 

ANOTHER. 

One nation can not take from another the revenues of its indus- 
try. A German tailor, establishing himself in France, there makes 
a proht, m which Germany had no participation. But, if this tailor 
contrive to amass a little capital, and after the lapse of several years 
carry it back with him to his native country, he injures France to 
the same extent as a French capitalist, who should emigrate with 
the same amount of fortune.* In a political view, the injury to the 
wealth of the nation is equal in both cases; but in a moral light, it is 
otherwise; for I reckon ihat a native Frenchman in quitting his 
country, robs it of an affectionate attachment, and a spirit of exclu- 
sive nationality which it can never look for in a stranger born 

A nation, receives a stray child into its bosom again, acquires a 
real treasure; inasmuch as in him it receives an addition to its popu- 
lation, an accession to the profits of national industry, and an acqui- 
sition of capital. It at the same time recovers a lost citizen, and the 
means for him to subsist upon. If the exile bring back his indus- 
try only at any rate the profits of industry are added to the national 

A A A u ^^ ^^^^' ^^^^ ^ ^^^^^^ °^ consumption is likewise super- 
added; but supposing it to counterbalance the advantage, there is no 
diminution of revenue, while the moral and political strength of the 
country is actually augmented.(a) 

With regard to the capital lent by one nation to another, the effect 
upon their respective wealrti is precisely analogous to that, resulting 
from every loan from one individual to another. If France borrow 
capttnllrom Holland, and devote it to a productive purpose, she will 
gain the profit of industry and land accruing from the employment 
01 that capital; and she will do so even although she pay interest; 
in like manner as a merchant or manufacturer borrows for the pur- 

of *n J^^ar^h *^''' ''fu''^ ^^^^^ ^"^'^ °*' ^'^ P^^«°"^l frugality, he robs France 
res2£LrI^^'r^^'^''''fl^ previous to his arrival.'' Had he continued 
trthe fi,i?pvt' !t fW^S^'^ '^ the capital of France would have been increased 
he takes ir^ni?h *»'\^°«"°^"latio»; but, in taking the whole away with him 
Creadon, in TV ^,!' """^ '^"""^"g^' ^"^ "° ^^^'^^ ^ut what is of his own 
wroig. ^^' ^ ''°""™"' "'^ individual, and, therefore, no national 

becausl^M. .T"""" '°"?' u^ ^^'"^'^ """^ ^" ^'^^"i°" is a national benefit, 
But defectivP 1^^''''?. '? '^' secondary source of production, i. e. industry 
Door wi ? ™^" institu ions may convert a benefit into a curse; as where a 
Sf kboTrTutTn?r>^fK""°"' subsistence to a part of the population, capable 
may be a tlZl 1"^^^,^^, ^^"t- In such case, every additional human being 



CHAP. X. ON DISTRIBUTION. 373 

poses of. his concern, and gains a residue of profit, even after pavinff 
the interest of the loan. * 

But, if one state borrow from another, not for productive pur- 
poses, but for those of mere expenditure, the capital borrowed will 
then yield no return, and the national revenue be saddled with the 
interest to the foreign creditor. Such was the condition of France 
when she borrowed from the Genoese, the Dutch, and -the Genevese' 
tor the support of her wars, or to feed the prodigality of a court' 
Yet It was better to borrow from strangers than from natives, even 
tor the purpose of dissipation; because the amount so borrowed was 
not withdrawn from the national productive capital of France In 
either case, the French people would have to pay the interest;* but 
had they likewise lent the capital, they would have had to pay the 
interest, and at the same time have lost the benefit, which their 
industry and land might have derived from its employment and 
agency. 

With regard to such landed property, as may belong to foreigners 
residing abroad, the revenue arising from it is an item of foreign, 
and forms no part of the national revenue. But it is to be remem- 
bered, that the foreigner cannot have purchased it without a remit- 
tance of capital equal in value to the land; which capital is an equally 
valuable acquisition, particularly if the nation be possessed of im- 
proveable land in abundance, but of little capital to set industry in 
motion. In making his purchase of land, the foreigner exchanges a 
revenue of capital, which he leaves the nation to profit by, for a 
revenue of land: which he thenceforth receives; thus barterino- in- 
terest of money for rent of land. If the national industry be aSive 
and skilfully directed, more benefit may be derived from the interest, 
than was before obtained from the rent; the purchaser, however, 
requires a fixed and permanent property, in lieu of one more perish- 
able, transferable, and destructible. Mismanagement may soon an- 
nihilate the capital the nation has acquired; but the land remains a 
permanent possession of the purchaser, and he may sell it and get 
back the value when he pleases. There is therefore nothing to be 
apprehended from the purchase of land by foreigners, provided there 
be wisdom enough, to employ in reproduction the value received in 
exchange. 

The particular form, in which one nation may draw revenue from 
another, is of no importance whatever. It may be remitted in specie, 
m bullion, or in any other kmd of merchandise: indeed it is of the 
greatest consequence to leave individuals to take it in the shape that 
best suits their convenience; for what suits them will infallibly be 
the best for both nations; in like manner as in the conduct of inter- 
national trade, the commodity, which individuals export or import 
in preference, is that which best suits the mutual national interests. 

Ihe agents of the English East India Company drew from that 

* It will be shown in Book III., that the interest is equally lost, whether 
spent internally or externally. 



374 ON DISTRIBUTION. book ii. 

country, either an annual revenue, or an accumulated fortune, which 
they returned to England to enjoy and live upon: they took good 
care not to withdraw these remittances in the shape of gold or 
silver, because the precious metals were of more relative value in 
Asia than in Enrope; they remitted in the shape of India goods 
and products, on which a fresh profit was made on arrival in Eu- 
rope: every million they remitted, swelled, perhaps, to so much as 
l,aOO,000, by the time it reached the place of destination. Thus, 
Europe gained to the amount of 1,200,000, while India lost only a 
million. If these despoilers of India^(a) insisted on transmitting 
this whole sum in specie, they must have robbed Hindustan, per- 
haps, of 1,500,000, or upwards, for every 1,200,000, that England 
received. The same sum may, perhaps, have been amassed origi- 
nally in specie; but it was always remitted in the shape of that 
commodity, which, for the time being, answered best as an object of 
transport. As long as exportation of any kind is allowed, and ex- 
portation has always been regarded by statesmen with a favourable 
eye, it is easy to receive in our country, the revenue and capital 
derived from another. And the remittance cannot be prevented by 
the government, without the interdiction of all external commerce, 
which, after all, would leave the resource of smuggling and contra- 
band. In the eyes of political economy, nothing is more absurd, 
than to see governments prohibit the export of the national specie, 
as a means of checking the emigration of wealth.t 

* Raynal tells us, that, inasmuch as the East India Company derived a reve- 
nue from Bengal, to be consumed in Europe, it must infallibly drain it of specie 
in the end, since the company is the only merchant, and imports no specie itself. 
But Raynal is mistaken in this. In the first place, private merchants do carry 
the precious metal to India, because they are of more value there than in Europe; 
and that very reason also deters the servants of the company, who may have 
made fortunes in Asia, from remitting them in specie. 

And if it were to be suggested, that a fortune, remitted to Europe, is less sub- 
stantial and more speedily dissipated, when it arrives in the shape of goods, than 
when in that of specie, this again would be an error. The form, that property 
happens to assume, does not affect its substantiality; when once transferred to 
Europe, it may be converted into specie, or land, or what not. It is the amount 
of values, and not the temporary form they appear under, which, in this colonial 
connexion, as in that of international trade, is the essential circumstance. 

f The complete interception of all export of objects of value would not help 
them towards the point of intent; because free communication occasions a much 
greater influx than efflux of wealth. Value, or wealth, is by nature fugitive and 
independent. Incapable of all restraint, it is sure to vanish from the fetters that 
are contrived to confine it, and to expand and flourish under the influence of 
liberty. 

(a) This is a harsh word, yet probably justified by the history of the original 
acquisition. But the scene has now changed; the servants of the sovereign 
company no longer look to spoliation as a public or private resource, but are 
content with the liberal remuneration of laborious duties, civil, military, and 
financial. A slight examination of the connexion between Britain and her 
Asiatic dependencies will show, how small a balance is remitted to the former 
in any shape; and it should be remembered that part, even of this, is but the 
interest of loans raised in England, for the purposes of Indian administration, 
though not always of a wise or paternal character. T. 



CHAP. XI. ON DISTRIBUTION. 



375 



CHAPTER XI. 

OP THE MODE IN WHICH THE QUANTITY OP THE PRODUCT AFFECTS 

POPULATION. 

Section I. 
Of Population, as connected with Political Economy. 

nefetlrrio "th?7l' i' T'^'iT^ '^'^ production of the articles 
necessa > to the satisfaction of human wants, and in the present 
Book, traced their distribution among the different members^of the 
community, let us now further extend our observations to the influ! 
whioh thf P' '■! ^•''''"'' "P°" ^^^ """^'^^»- of individuals, of 
In her t?pT""fV'ir"'P°''^V^^^* ^^ *° '^^^ "P«" population. 

the ndivi.S .^ ^ !."°'^'"^' ^°^^'^' "^^"^^ seems to neglect 
the individual and afford protection only to the species. Natural 
history presents very curious examples of her extraordinary care to 
fhat^nltnn, ^Pf^ies; but the most powerful means she adopts for 
th!t Snf^ i'/' ^^^ multiplication of germs in such vast profusion, 
IrevPniTi; '"t"5 ^'^^™^^^^«e variety of accidents occurring to 
prevent their early development, or destroy them ii. the progres? to 
maturity, there are always left more than sufficient to per|et^iate 
the species. Did not accident, destruction, or failure of theCans 
I's noS^"' f 'f.w^ multiplication of organic existence,Xre 
very few years.' "' """' "^^'' "°' ''''' '''' '^'^ °^ *^- S^°^^ "^ ^ 

nrin!' ^r!5 -^^ ""^ 'f^'l^t '"'''^''^ '^ common to man, with all other 
organic bodies; and although his superior intelligence continually 

at tStimum'^'' ""^'"^ °^ existence he must sooner or later arrive 
Animal existence depends upon the gratification of one sole and 
rfacnl v7"'' ^^^^°.f f«°^-d sustenalice; but man is enabled, by 
for anoS .n'r'"""''^''^ '""''^ ^'' ^P^^^^^' ^^ ^^^^er one product 
nroduP Tl /'^''^ ^^' ^"^"'' '^'^^' t'^^" the nature of the 

product. The producer and owner of a piece of furniture of twenty 
dollais value may consider himself as possessing as much human 
rdativP n"^ b^ P'-o^urable for that price!^ And v?ith respect to the 
lfu^Z\F A^ of products, It IS in all cases determined by the Inten- 
beL %^^'''^' the degree of utility in each product for the time 

wi 11 ^;ntT^ T"^ ''^u!^ ''^; '^ ^°" S^''^"^^^' that mankind in general 
will not barter an object of more, for one of less urgent necessity. 

win be'^^v °V^"' 'n''* ''''''''>^' " '•'^''S^^ ^"^"tity of furniture 
rarLwv^ !f f T'""' ^"'"^'t>^ ^^ ^"'"^^ ^^^"^^"t; but it is in- 

variably true, that whenever barter takes place, the object given on 



376 



ON DISTRIBUTION. Booxn. 



one side is worth that given on the other, and that the one is pro- 
curable for the other.* j . + 

Trade and barter, as we have seen above, adapt the products to 
the general nature of the demand. The objects, whether of food 
or raiment, or of habitation, for which the strongest desire is felt, 
are of course the most in request; and the wants of each family or 
individual, are more or less fully satisfied, in proportion to the ability 
to purchase these objects; which ability depends upon the produc- 
tive means and exertion of each respectively; in plain terms, upon 
the revenue of each respectively. Thus, in the end, if we sift this 
matter to the bottom, we shall find, that families and nations, which 
are but aggregations of families, subsist wholly on their own pro- 
ducts; and that the amount of product in each case necessarily limits 
the numbers of those who can subsist upon it 

Such animals as are incapable of providing for future exigencies, 
after they are engendered, if they do not fall a prey to man, or some 
of their fellow brutes, perish the moment they experience an impe- 
rative want, which they have not the means of gratifying. Hut 
man has so many future wants to provide for, that he could not 
answer the end of his creation, without a certain degree ot provi- 
dence and forethought: and this provident turn can alone preserve 
the human species from part of the evils it would necessarily endure, 
if its numbers were to be perpetually reduced by the process ot 

destructive violence.! ., j ^ „„j fV,^ 

Yet notwithstanding the forethought ascribed to man, and the 
restraints imposed on him by reason, legislation, and social habits, 
the increase of population is always evidently co-extensive, and even 
something more than co-extensive, with the means of subsistence. 
It is a melancholy but an undoubted fact, that, even in the most 

* Although all products are necessary to the social existence of man, the ne- 
cessitv of food beinff of all others most urgent and unceasmg, and of most tre- 
qren^^recurr^nce ejects of aliment are justly placed first ;« the -talj>gue of 
the means of human existence. They are n«t all, however, the produce ot the 
national territorial surface; but are procurable by commerce ^%^fll^^^« Jy "^^ 
ao-riculture- and many countries contain a greater number of inhabitants, than 
S subsist upon th^ produce of their lant. Nay, the iniportation of anothe^^ 
commodity may be equivalent to an importation of an article of food The export 
of wines and brandies to the north of Europe is almos ^^.^^Jf "^/^ ^^S and 
of bread; for wine and brandy, in great measure, .supply the place of beer and 
spirits distilled from grain, and thus allow the grain, ^^ich would otherwise be 
emnloved in the preparation of beer or spirits, to be reserved for that ot bread. 

t The pJactice^of Lfanticide in China proves, that the local prejadices of cus- 
tom and of religion there counteract the foresight which tends to check the 
SSease of population; and one can not but deplore such P^^Hic^^s; for the hu- 
man misery resulting from the destruction is great, in P^oP^jfion as it^ object s 
more fully developed, and more capable of sensation, /or this reason it would 
be still more barbarous and irrational policy to ™"lt'ply wars, and other means 
of human destruction, in order to increase the enjoyments °f the survivors, be 
cause the destructive scourge would affect human beings in a state "o^e pertect, 
more susceptible of feeling and sufiering, and arrived at ^ P,«"°/ ^^ fjf; 
the mature display of his faculties renders man more valuable to himself and to 
others. 



CHAP. XI. ON DISTRIBUTION. 377 

thriving countries, part of the population annually dies of mere want. 
Not that all who perish from want absolutel}^ die of hunger; though 
this calamity is of more frequent occurrence than is generally sup- 
posed.* I mean only that they have not at command all the neces- 
saries of life, and die for want of some part of those articles of neces- 
sity'. A sick or disabled person may, perhaps, require nothing more 
than a little rest, or medical advice, together with, perhaps, some 
simple remedy to set him up again; but the requisite rest, or advice, 
or remedy, are denied, or not afforded. A child may require the 
attentions of the mother, but the mother perhaps may be taken 
away to labour, by the imperious calls of necessity; and the child 
perish through accident, neglect, or disease. It is a fact well esta- 
blished by the researches of all who have turned their attention to 
statistics, that out of an equal number of children of wealthy and of 
indigent parents, at least twice as many of the latter die in infancy 
as of the former. In short, scanty or unwholesome diet, the insuffi- 
cient change of linen, the want of warm and dry clothing, or of 
fuel, ruin the health, undermine the constitution, and sooner or later 
bring. multitudes of human beings to an untimely end; and all, that 
perish in consequence of want beyond their means to supply, may be 
said to die of want. 

Thus, to man, particularly in a forward state of civilization, a 
variety of products, some of them in the class of what have been 
denominated immaterial products, are necessaries of existence; these 
are multiplied in a degree proportionate to the desire for them, 
respectively, because its intensity causes a proportionate elevation 

* The Hospice de Bicetre, near Paris, contains, on the average, five or six thou- 
sand poor. In the scarcity of the year 1795, the governors could notafFord them 
food, either so good or so abundant as usual; and I am assured by the house- 
steward of the establishment, that at that period almost all the inmates died. 

It would appear from the returns given in a tract entitled " Observations on the 
Condition of the Labouring Classes," by J. Barton, that the average of deaths, in 
seven distinct manufacturing districts of England has been proportionate to the 
dearness, or, in other words, to the scarcity of subsistence. I subjoin an extract 
from his statements. 

Average price of Wheat 
Years. per qr. Deaths. 

s. d. 

1801 . . . 118 3 . . . 55,965 

1804 . . . 60 1 . . . 44,794 

1807 . . . 73 3 . . . 48,108 

1810 . . . 106 2 . . . 54,864 

From the same returns it appears, that the scarcity occasioned less mortality 
in the agricultural districts. The reason is manifest: the labourer is there more 
commonly paid in kind, and the high sale-price of the product enabled the farmer 
to give a high purchase-price for labour.(a) 

(«) The latter reason is not very satisfactory; for the total receipts of the corn 
growers are probably not larger in"'years of scarcity, than in those of abundance. 

48 



378 ON DISTRIBUTION. book ii. 

of their price: and it may be laid down as a general maxim, that the 
population of a state is always proportionate to the sum of its pro- 
duction in every kind.* This is a truth acknowledged by most 
writers on political economy, however various and discordant their 
opinions on most other points.t(l) 

It appears to me, however, that one very natural consequence, 
deducible from this maxim, has escaped their observation; which is, 
that nothing can permanently increase population, except the encou- 
ragement and advance of production; and that nothing can occasion 
its permanent diminution, but such circumstances as attack produc- 
tion in its soui'ces. 

The Romans were forever making regulations to repair the loss 
of population, occasioned by their state of perpetual external warfare. 
Their censors preached up matrimony; their laws offered premiums 

* Not but that accidental causes may sometimes qualify these general rules. 
A country, where property is very unequally distributed, and where a few indi- 
viduals consume produce enough for the maintenance of numbers, will doubtless 
subsist a smaller population, than a country of equal production, where wealth 
is more equally diffused. The very opulent are notoriously averse to the bur- 
then of a family; and the very indigent are unable to rear one. 

f Vide Stewart, On Political Economy , book i. c. 4. Quesnay Encyclopedie, art. 
Chrains. Montesquieu, Esprit des Lois, liv. 18. c. 10. and liv. 23. c. 10. Buffon. 
ed. de Bernard, torn. iv. p. 266. Forbonnais, principes et Observations, p. 39, 45, 
Hume, Essays, part 2, Ess. 2. (Euvres de Poivre, p. 145, 146. Condillac, Le 
Commerce et le Gouvernement, part 1, chap. 24, 25. Verri, Rejiexions sur VEcon- 
omie Politique, c. 210. Mirabeau, Ami des Hommes, tom. i. p. 40. Raynal, His- 
toric de V Estahlissement, liv. 21. s. 23. Chastellux, Be la Felicite Publique, tom. 
ii. p. 205. Necker, Administration, des Finances de France, c. 9. and Notes sur 
VEloge de Colbert. Condorcet, Notes sur Voltaire, ed. de Kepi. tom. xlv. p. 60. 
Smith, Wealth of Nations, book i. c. 8, 11. Gamier, Abreg'e Elementaire, part 
1. c. 3. and Preface de sa Traduction de Smith. Canard, Principes d' Economic 
Politique, p. 133. Godwin, On Political Justice, book viii. c. 3. Claviere, Be 
la France et des Etats Unis, ed. 2. p. 60, 315. Brown-Duignan; Essay on the 
Principles of National Economy, p. 97. Lond. 1776. Beccaria, Elementi di Eco- 
nomia Publica, par. prim. c. 2, 3. Gorani, Becherches sur la Science du Gouverne- 
ment, tom. ii. c. 7. Sismondi, Nouv. Prin. d''Econ. Pol. liv. vii. c. 1. et seq. 
Vide also, more especially, Malthus, Essay on Population, a work of considerable 
research; the sound and powerful arguments of which would put this matter 
beyond dispute, if it indeed had been doubted. 

(1) The simple laws of population, or their general principles, which are few 
and plain, are examined, discussed, and established with great ability by Pro- 
fessor Senior, of Oxford, as well in the two lectures on Population we have 
already referred to, as in his subsequent correspondence with Mr. Malthus, to 
which these lectures gave rise, and which Mr. Senior has subjoined to them, in 
an appendix. Full justice is done, by Mr. Senior, to the originality and depth, 
of Mr. Malthus's views on Population, as well as to their great importance, at 
the time he first gave them to the public; the inaccuracy, nevertheless, in his 
statement of the general proposition, namely, the tendency of every people to 
increase in their numbers, more rapidly than in their wealth, is clearly pointed 
out, and the errors which flow from it satisfactorily exhibited. " If a single 
country," says Mr. Senior, " can be found in which there is now less poverty 
than is universal in a savage state, it must be true, that under the circumstances 
in which that country has been placed, the means of subsistence have a greater 
tendency to increase than the population." American Editor. 



CHAP. XI. ON DISTRIBUTION. 379 

and honours to plurality of children; but these measures were fruit- 
less. There is no difficulty in getting children; the difficulty lies in 
maintaining them. They should have enlarged their internal pro- 
duction, instead of spreading devastation amongst their neighbours. 
All their boasted regulations did not prevent the effectual depopula- 
tion of Italy and Greece, even long before the inroads of the barba- 
rous northern hordes.* 

The edictof Louis XVI, in favour of marriage, awarding pensions 
to those parents, who should have ten, and larger ones to those, who 
should have twelve children, was attended with no better success. 
The premiums that monarch held out in a thousand ways to indo- 
lence and uselessness, were much more adverse, than such poor 
encouragements could be conducive, to the increase of population. 

It is the fashion to assert, that the discovery of the new world has 
tended to depopulate old Spain; whereas her depopulation has resulted 
from the vicious institutions of her government, and the small amount 
of her internal product, in proportion to her territorial extent.t The 
most effectual encouragement to population is, the activity of indus- 
try, and the consequent multiplication of the national products. It 
abounds in all industrious districts, and, when a virgin soil happens 
to co-operate with the exertions of a community, whence idleness is 
altogether discarded, its rapid increase is truly astonishing. In the 
United States of America, population has been doubling in the course 
of twenty years. 

For the same reasons, although temporary calamities may sweep 
off multitudes, yet, if they leave untainted the sources of reproduc- 
tion, they are sure to prove more afflicting to humanity, than fatal to 
population. It soon trenches again upon the limit, assigned by the ag- 
gregate of annual production. Messance has given some very curious 
calculations, whereby it appears, that, after the ravages occasioned 
by the famous plague of Marseilles in 1720, marriages throughout 
Provence were more fruitful than before. The Abbe d'Expilly 
comes to the same conclusion. The same effect was observable in 
Prussia, after the plague of 1710. Although it had swept off a third 
of the population, the tables of Sussmilchl show the number of 
births, which, before the plague, amounted annually to about 26,000, 
to have advanced in the year following, 1711, to no less than 32,000. 
It might have been supposed, that the number of marriages, after so 
terrible a mortality, would have been at least considerably reduced; 
on the contrary, it actually doubled; a strong indication of the ten- 
dency of population to keep always on a level with the national 
resources. 

The loss of population is not the greatest calamity resulting from 
such temporary visitations; the first and greatest is, the misery they 

* Vide Livii Hist, lib. vi. Flutarchi Moralia, xxx. De defectu oraculorum. 
Strabonia, lib. vii. 

t Ustariz has remarked, that the most populous provinces of Spain are those, 
from which there has been the greatest emigration to America. 

X Quoted by Malthus, in his Essarf on Ponul. vol. ii. 



380 ON DISTRIBUTION. book ii. 

occasion to the human race. Great multitudes can not be swept from 
the land of the living by pestilence, famine, or war, without the 
endurance of a vast deal of suffering and agony, by numbers of sen- 
tient beings; besides the pain, distress, and misery of tlie survivors; 
the destitution of widows, orphans, brothers, sisters, and parents. It 
is a subject of additional regret, if, among the rest, there happen to 
fall one or two of those superior and enlightened men, whose single 
talents and virtues have more effect upon the happiness and wealth 
of nations, than the groveling industry of a million of ordinary mor- 
tals. 

Morever, a great loss of human beings, arrived at maturity, is • 
certainly a loss of so much acquired wealth or capital; for every I 
grown person is an accumulated capital, representing all the advan- 
ces expended during a course of many years, in training and mak- 
ing him what he is. A bantling a day old by no means replaces a 
man of twenty; and the well-known expression of the Prince de 
Conde, on the victorious field of Senef, was equally absurd and 
unfeeling.* ^ 

The destructive scourges of the human species, therefore, if not 
injurious to population, are at least an outrage on humanity; on 
which account alone, their authors are highly criminal.t 

But though such temporary calamities are more afflicting to hu- 
manity, than hurtful to the population of nations, far other is the 
effect of a vicious government, acting upon a bad system of political 
economy. This latter attacks the very principle of population, by 
drying up the sources of production; and since the numbers of 
mankind, as before seen, always approach nearly to the utmost 

* " Une nuit dc Paris reparera tout cela.''^ It requires the care and expendi- 
ture of twenty successive years to replace the full-grown man, that a cannon-ball 
has destroyed in a moment. The destruction of the human race by war is far 
more extensive than is commonly imagined. The ravage of a cultivated district, 
the plunder of dwelling-houses, the demolition of establishments of industry, 
the consumption of capital, &c. &c. deprive numbers of the means of livelihood, 
and cause many more to perish, than are left on the field of battle. 

t Upon this principle, no capital improvement of the medicinal or chirurgical 
art, like that of vaccination for instance, can permanently influence national 
population; yet its influence upon the lot of humanity may be very considerable; 
for It may operate powerfully to preserve beings already far advanced in age, in 
strength, and in knowledge: whom to replace, would cost fresh births and fresh 
advances; in other words, abundance of sacrifices, privations, and sufferings 
both to the parents and the children. When population must be kept up by 
additional births, there is always more of the suffering incident to the entrance 
and the exit of human existence; for they are both of more frequent occurrence. 
Population may be kept up with half the number of births and deaths, if the 
average term of life be advanced from forty to fifty years. There will, indeed, 
be a greater waste of the germs of existence; but the condition of mankind must 
be measured^ by the quantum of human suffering, whereof mere germs are not 
susceptible. The w^aste of them is so immense, in the ordinary course of nature, 
that the small addition can be of no consequence. Were the vegetable creation 
endowed with sensation,, the best thing that could happen to it would be, that 
the seeds of all the vegetables, now rooted up and destroyed, should be decom- 
posed before the vegetable faculties were awakened. 



CHAP. XI. ON DISTRIBUTION. 381 

limits the annual revenue of the nation will admit of, if the govern- 
ment reduce that revenue by the pressure of intolerable taxation, 
forcing the subject to sacrifice part of ^is capital, and consequently 
diminishing the aggregate means of subsistence and reproduction 
possessed by the community, such a government not only imposes 
a preventive check on further procreation, but may be fairly said to 
commit downright murder; for nothing so effectually thins the ef- 
fective ranks of mankind, as privation of the means of subsistence. 

The evil effects of m.onastic establishments upon population, have 
been severely and justly inveighed against; but the mode, in which 
they operate, has been misunderstood; it is the idleness, not the 
celibacy, of the monastic orders, that ought to be censured. They 
put their lands into cultivation, it is true, but where is the merit of 
that? Would the lands remain untilled, if the monastic system 
were abolished? So far from that evil resulting from the abolition, 
wherever these establishments have been converted into manufac- 
tories, of which the French revolution has offered many examples, 
equal agricultural produce has continued to be raised, and the pro- 
duce of the manufacturing industry has been all clear gain; while 
the increased total product, thus created, has been followed by an 
increase of population also. 

From these premises, may likewise be drawn this further conclu- 
sion ; that the inhabitants of a country are not more scantily sup- 
plied with the necessaries of life, because their number is on the 
increase; nor more plentifully, because it is on the decline. Their 
relative condition depends on the relative quantity of products they 
have at their disposal; and it is easy to conceive these products to 
be considerable, though the population be dense; and scanty, though 
the population be thinly spread. Famine was of more frequent oc- 
currence in Europe during the middle ages, than it has been of late 
years, although Europe is evidently more thickly peopled at pre- 
sent. The product of England, during the reign of queen Eliza- 
beth, was not nearly so abundant as it is now, although her popula- 
tion was then less by half; and the population of Spain reduced to 
but eight millions, enjoys not nearly so much affluence, as when it 
amounted to twenty -four. ^ 

Some writerst have considered a dense population as an index of 
national prosperity; and, doubtless, it is a certain sign of enlarged 
national production. But general prosperity implies the general 
diffusion and aljundance of all the necessaries, and some of the su- 
perfluities of life amongst all classes of the population. Some parts 
of India and of China are oppressed with population and with misery 
also; but their condition would be nowise improved by thinning its 

* If population depends on the amount of product, the number of births is a 
very imperfect criterion, by which to measure it. When industry and produce 
are increasing, births zre muhiplied disproportionately to the existing population, 
so as to swell the estimate; on the contrary, in the declining state of national 
wealth, the actual population exceeds the average ratio to the births. 

I Wallace, Condorcet, Godwin. 



382 ON DISTRIBUTION. book ii. 

numbers, at least if it were brought about by a diminution of the 
aggregate product. Instead of reducing the numbers of the popula- 
tion, it were far more desirable to augment the gross product; 
which may always be effected by superior individual activity, in- 
dustry, and frugality, and the better administration, that is to say, 
the less frequent interference, of public authority. 

But it will naturally be asked, if the population of a country re- 
gularly keeps pace with its means of subsistence, what will become 
of it in years of scarcity and famine? 

Hear what Stewart* says on the subject: "There is a very great 
deception as to the difference between crops; a good year for one 
soil is bad for another." " It is far from being true," he continues, 
" that the same number of people consume always the same quantity 
of food. In years of plenty, every one is well fed; — food is not so 
frugally managed; a quantity of animals are fatted for use; — and 
people drink more largely, because all is cheap. A year of scarcity 
comes; the people are ill fed; and when the lower classes come to 
divide with their children, the portions are brought to be very 
small;" instead of saving, they consurhe their previous hoard; and, 
after all, it is unhappily too true, that part of that class must suffer 
and perish. 

This calamity is most common in countries overflowing with 
population, like Hindustan, or China, where there is little external 
or maritime commerce, and where the poorer classes have always 
been strictly limited to the mere necessaries of life. There, the 
produce of ordinary years is barely sufficient to allow this miserable 
pittance; consequently, the slightest failure of the crop leaves mul- 
titudes wholly destitute of common necessaries, to rot and perish 
by wholesale. All accounts agree in representing that famines are, 
for this reason, very frequent and destructive in China and many 
parts of Hindustan. 

Commerce in general, and maritime commerce in particular, faci- 
litates the interchange of products, even with the most remote coun- 
tries, and thus renders it practicable to import articles of subsistence) 
in return for several other kinds of produce; but too great a depend- 
ence on this resource, leaves the nation at the mercy of every natural 
or political occurrence, which may happen to intercept or derange the 
intercourse with foreign countries. The intercourse must then be 
preserved at all events, no matter whether by force or fraud ; com- 
petition must be got rid of by every means, however unjustifiable; a 
separate province, or weak ally, perhaps, is obliged to purchase the 
national products, under restrictions equally galling, as the exac- 
tion of actual tribute; and a commercial monopoly enforced, even 
at the hazard of a war; all which evils make the state of the nation 
extremely precarious indeed. 

The produce of England, in articles of human subsistence, had 
undoubtedly increased largely towards the end of the 18th century; 

* Sir James, of Coltness, book i. c. 17. 



CHAP. XI. ON DISTRIBUTION. 383 

but its produce in articles of apparel and household furniture had 
probably increased still more rapidly. The consequence has been, 
that immensity of production, which enables her to multiply her 
population beyond what the produce of her soil can support,* and 
to bear up under the pressure of public burthens, to which there is 
no parallel nor even approximation. But England has suffered 
severely, whenever foreign markets have been shut against her pro- 
duce; and she has sometimes been obliged to resort to violent means 
to preserve her external intercourse. She would act wisely, per- 
haps, in discontinuing those encouragements, that impel fresh capital 
into the channels of manufacture and external commerce, and 
directing it rather towards that of agricultural industry. It is pro- 
bable, that in that case, several districts, which have not yet received 
the utmost cultivation of which they are susceptible, particularly 
many parts of Scotland and Ireland, would raise agricultural pro- 
duce enough to purchase most part, if not the whole, of the surplus 
product of her manufactures and commerce beyond her present 
consumption.! Great Britain would thereby create for herself a 
domestic consumption, which is always the surest and the most advan- 
tageous. Her neighbours no longer offended by the necessarily 
jealous and exclusive nature of her policy, would probably lay 
aside their hostile feelings, and become willing customers. But, 
after all, if her manufactured, should still be disproportioned to her 
agricultural produce, what is there to prevent her from adopting a 
system of judicious colonization, and thus creating for herself fresh 
markets for the produce of her domestic industry in every part of 
the globe, whence she might derive, in return, a supply of food for 
her superfluous population?^ 

In this particular, the position of France appears to be precisely 
opposite to that of Great Britain. It would seem, that her agricul- 
tural product is equal to the maintenance of a much larger manu- 
facturing and commercial population. The face of the country 

* In a pamphlet entitled, Considerations on British JlgricuUure, published in 
1814, by W. Jacob, a member of the Royal Society, and a well informed writer 
upon agricultural topics, we are told, (p. 34,) that England ceased to be an ex- 
porter, and became an importer, of wheat, about the year 1800. 

t The writer last cited enters into long details to show, that the soil of the 
British isles could be made to produce at least a third more than their present 
product, ibid. p. 115. et seq. 

X By judicious colonization, I mean colonization formed on the principles of 
complete expatriation, of self-government without control of the mother country, 
and of freedom of external relations; but with the enjoyment of protection only 
by the mother country, while it should continue necessary. Why should not 
political bodies imitate in this particular the relation of parent and child? When 
arrived at the age of maturity, the personal independence of the child is both 
just and natural; the relation it engenders is, moreover, the most lasting and most 
beneficial to both parties. Great part of Africa might be peopled with Euro- 
pean colonies formed on these principles. The world has yet room enough, and 
the cultivated land on the face of the globe is far inferior in extent to the fertile 
land remaining untilled. The earl of Selkirk has thrown much light on this 
matter in his tract on Emigration and the State of the Highlands. 



384 ON DISTRIBUTION. bookh. 

presents the picture of high and general cultivation; but the vil- 
lages and country towns, are, for the most part, surprisingly small, 
poor, ill-built, and ill-paved, the few shops scantily supplied, and 
the public houses, neither neat nor comfortable. It is plain, the 
agricultural product must either be less than the appearance would 
indicate, or it must be consumed in a thriftless and unprofitable man- 
ner; probably both these causes are in operation. 

In the first place, the production is far less than it might be; and 
this is chiefly owing to three causes: — 1. The want of capital, parti- 
cularly in enclosures, live stock, and amelioration:* 2. The indolence 
of the cultivators, and the too general neglect of weeding, trimming 
the hedges, clearing the trees of moss, destroying insects, &c. &c. 
3. The neglect of a proper alternation of crops, and of the most 
approved methods of cultivation. 

In the second place, the consumption is unthrifty and unprofitable; 
for a great part of it is mere waste, and yields no human gratifica- 
tion whatever. To speak of one article alone, that is, of firing, 
which is an object of great value in districts, where coal and wood 
are scarce; the waste of it is enormous in the huts of the peasantry, 
lighted as they often are by the door-way only, and admitting the 
rain down the chimney while the fire is burning. Unwholesome 
beverage or food, and the indulgence of the alehouse, are like inju- 
rious modes of consumption. 

In fine, towns and villages would be more thickly spread, and 
would besides present an appearance of greater affluence, were the 
generality of the inhabitants more active and industrious, and actu- 
ated by the laudable emulation, tinctured perhaps with some little 
vanity, rather of possessing every object of real utility, and exhib- 
iting in their domestic arrangements the utmost order and neatness, 
than of living in indolence upon the rent of a trifling patrimony, 
or the scanty salary of some useless public employ. The small 
proprietor with an income of 3 or 400 dollars per annum, just suffi- 
cient to vegetate upon, might double or triple it perhaps by adding 
the revenue derivable from personal industry; and even those en- 
gaged in useful occupations, do not push them to the full extent of 
their activity and intelligence. Moreover, the spirit of inquiry and 
imprbvement has probably been disheartened by the example of 
frequent ill success; although the failure has commonly been occa- 
sioned by the want of judgment, perseverance, and frugality. 

National population is uniformly proportionate to the qua-iitum 
of national production; but it may vary locally within the limits of 
each state, according to the favourable or unfavourable operation 
of local circumstances. A particular district will be rich, because 
its soil is fertile, its inhabitants industrious, and possessed of capi- 

* The want of capital prevents the employment of machinery for expediting 
the operations, like the thrashing machine in common use in England. This 
makes a larger supply of human agency requisite in agriculture; and the more 
mouths there are to be fed, the smaller will be the surplus produce, which alone 
is disposable. 



CHAP. XI. ON DISTRIBUTION. 385 

tal accumulated by their frugality; in like manner as a family will 
surpass its neighbours in wealth, because of its superior intelli- 
gence and activity. The boundaries and political constitutions of 
states affect population only, inasmuch as they affect the national 
production. The influence of religion and national habits upon 
population is precisely analogous. All travellers agree, that pro- 
testant are both richer and more populous than catholic countries; 
and the reason is, because the habits of the former are more con- 
ducive to production. 



Section II. 
* 
Of the influence of the Quality of a national product upon the 
local distribution of the Population. 

For the earth to be cultivated, it is necessary that population 
should be spread over its surface; for industry and commerce to 
flourish, it is desirable to bring together in those spots, where the 
arts may be exercised with the most advantage; that is to say, 
where there can be the greatest subdivision of labour. The dyer 
naturally establishes himself near the clothier; the druggist near 
the dyer; the agent, or owner, of a vessel employed in the trans- 
port of drugs will approximate in locality to the druggist; and so 
of other producers in general. 

At the same tisie, all such as live without labour on the interest 
of capital, or the rent of landed property, are attracted to the 
towns, where they find brought to a focus, every luxury to feed 
their appetites, as well as a choice of society, and a variety of 
pleasure and amusement. The charms of a town life attract foreign 
visiters, and all such as live by their labour, but are free to ex- 
ercise it wherever they like. Thus, towns become the abode of 
literary men and artizans, and likewise the seat of government, 
of courts of justice, and most other public establishments; and their 
population is enlarged by the addition of all the persons attached 
to such establishments, and all who are accidentally brought thither 
by business. 

Not but what there is always a number of country residents, 
that are employed in manufacturing industry, exclusive of such as 
make it their abode in preference. Local convenience, running 
water, the contiguity of a forest or a mine, will draw a good deal 
of machinery, and a number of labourers, in manufacture, out of 
the precincts of towns. There are, likewise, some kinds of work, 
which must be performed in the neighbourhood of the consumers; 
that of the tailor, the shoemaker, or the farrier; but these are 
trifling compared with the manufacturing industry of all kinds exe- 
cuted in towns. 

Writers on political economy have calculated, that a thriving 
country is capable of supporting in its towns, a population equal 
49 



3S6 ON DISTRIBUTION. bookii. 

to that of the country. Some examples lead to an opinion, that it 
could support a still greater proportion, were its industry directed 
with greater skill and its agriculture conducted with more intelli- 
gence and less vvaste, even supposing its soil to be of very moder- 
ate fertility.- Thus much at least is certain, that, when the towns 
raise product for foreign consumption, they are then enabled to 
draw from abroad provisions in return, and may sustain a popula- 
tion much larger m proportion to that of the country. Of this we 
have instances in the numerous petty states, whose territory alone 
IS barely sufficient to afford subsistence to one of the suburbs of their 

C3.pit31. 

Again thecultivation of pasture land, requiring much less human 
labour than that of arable, it follows, that, in. grazing countrieTa 
greater proportion of the inhabitants can appi; themselves to the 
arts of industry; which are therefore more attended to in pasture 
that" was.(^^ ^^o^ntries. Witness Flanders, Holland, and Normandy 

*Thejre is good reason to believe, that the total population of EntrlanH ;« 

TeinV^lV\"e''''^^'f'^^' '""P^'^'^ *» her internal ^Stul ??„fthe 
returns laid before parliament, 1811, it appears there were in Great Britain in 

tlTl" f .^'^"' f ^ !^'^'^^"^' 895,998 families employed in aTrcuSe- and 
I thiS' fl'^ ""™b«r of families amounted to 2,544,215, whichTouWgfv; but 
a third of the population to the purposes of agriculture. ^ 

HmltsTwas"^ '" ^l'^''' ^'""^' '^' '^^""try population of France, within her old 

And that ofthe'cities and towns, ! '. [ ^VoJ^O 

Making a total of ofi Q-^O fins 

Supposing him to be correct, France, within her old boundary could Lin 

ZmV^'' P"rP^^' ^ P«P"l^«o" of 41 millions, supposinJ^hermerSv Jo" 

double her agricultura population; and of 60 millions, supposing her"ndusti^ 

were equally active with that of Great Britain.(c) PF^'^mg ner industry 

It IS the general remark of travellers, that the traffic of the o-reat roaH« .f 

t eVr2 roar;';. „f ','h " "'r""""',''"!""'''" ''"""•»'"■ '» town ,ha, peopfe.^ 

(a) Our author has here fallen into a palpable error. The ratio of the ao-nVnl 
tura , to the total population of Great BriLin, has not been vared as above ftS" 
solely, or even chiefly by the multiplication of the commercial and manufLt S 
classes; but by the transfer of the human labour spared in acrriculture to the tw! 

Population 'of' F "^ '"^''T \^'^'^^'r "^^^^t occupy one third on?/ of the 
population of France, and yet the total population be decreased and not multi! 

its^tmTto?vfo!;Sn/''"',J'"''^'^- A pastoral nation, devoting the whole of 
commerce ai 3 Enf^'.^ T'' ^Z''^ '"^"" proportion of its population for 
wZe a de^lrZ?. t '' "^""f '' ^^''^'^ ""^ ^'^^ P^'"?^^ of South America, 
to ?he iLd hnlH^rt. !f T^.'"*^, commercial population makes it advantageous 
suunlvnf . -^^ JT*'^ ^''' ^^""^ ^° P^^ture, and look to foreigners for the 

be^eq^uired for' Z^l^fTf' ^ '™^" ^"'^''''''' '' ^^^ P^P"'^^'- ^^J' -^e dt 
tionoSign^tiSui proportion will be i-equired for tL animal 



CHAP. XI. ON DISTRIBUTION. 387 

From the period of the irruption of the barbarians into the Roman 
empire, down to the 17th century, that is to say, to a date almost 
within living memory, the towns made but little figure in the larger 
states of Europe. That portion of the population, which was 
thought to live upon the cultivators of the land, was not then, as 
now, composed principally of merchants and manufacturers, but con- 
sisted of a nobility, surrounded by numerous retainers, of church- 
men and other idlers, the tenants of the chateau, the abbey, or the 
convent, with their several dependencies; very few of them living 
within the towns. The products of manufacture and commerce 
were very limited indeed; the manufacturers were the poor cotta- 
gers, and the merchants mere pedlars; a few rude implements of 
husbandry, and some very clumsy utensils and articles of furniture, 
answered all the purposes of cultivation and ordinary life. The 
fairs, held three or four times in the year, furnished commodities of 
a superior quality, which we should now look upon with contempt; 
and what rare household articles, stuffs, or jewels, of price, were 
from time to time imported from the commercial cities of Italy, or 
from the Greeks of Constantinople, were regarded as objects of 
uncommon luxury and magnificence, far too costly for any but the 
richest princes and nobles. 

In this state of things, the towns of course made but a poor figure. 
Whatever magnificence they may possess in our time is of very 
modern date. In all the towns of France together, it would be 
impossible to point out a single handsome range of buildings, or fine 
street, of two hundred years' antiquity. There is nothing of ante- 
rior date, with the exception of a few Gothic churches, but clumsy 
tenements huddled together in dirty and crooked streets, utterly 
impassable to the swarm of carriages, cattle, and foot-passengers, 
that indicates the present population and opulence. 

No country can yield the utmost agricultural produce it is equal 
to, until every part of its surface be studded with towns and cities. 
Few manufactures could arrive at perfection, without the conveni- 
ences they afford ; and, without manufactures, what is there to give 
in exchange for agricultural products? A district, whose agricultu- 
ral products can find no market, feeds not half the number of inha- 
bitants it is capable of supporting; and the condition, even of those 
it does support, is rude enough, and destitute both of comfort and 
refinement; they are in the lowest stage of civilization. But, if an 
industrious colony comes to establish itself in the district, and gra- 
dually forms a town, whose inhabitants increase till they equal the 
numbers of the original cultivators, the town will find subsistence on 
the agricultural product of the district, and the cultivators be 
enriched by the product of the industry of the town. 

Moreover, towns offer indirect channels for the export of the 
agricultural values of the district to a distant market. The raw 
products of agriculture are not easy of transport, because the 
expense soon swallows up the tot;iI price of the commodity trans- 
ported. Manufactured produce has greatly the advantage in this 



388 ON DISTRIBUTION. book ii. 

respect; for industry will frequently attach very considerable value 
to a substance of little bulk and weight. By the means of manu- 
facture, the raw products of national agriculture are converted into 
manufactured goods of much more condensed value, which will 
defray the charge of a more distant transport, and bring a return of 
produce adapted to the wants of the exporting country. 

There are many of the provinces of France, that are miserable 
enough at present, yet want nothing but towns to bring them into 
high cultivation. Their situation would, indeed, be hopeless, were 
we to adopt the system of that class of economists, which recom- 
mends the purchase of manufactures from foreign countries, with the 
raw produce of domestic agriculture. (1) 

However, if towns owe their origin and increase to the concentra- 
tion of a variety of manufactures, great and small, manufactures, 
again, are to be set in activity by nothing but productive capital; and 
productive capital is only to be accumulated by frugality of con- 
sumption. Wherefore, it is not enough to trace the plan of a town, 
and give it a name; before it can have real existence, it must be gra- 
dually supplied with industrious hands, mechanical skill, implements 
of trade, raw materials and the necessary subsistence of those engaged 

(1) [The slow progress of agriculture in these provinces of France is not 
attributable to the want of towns in the midst of them; towns and cities are a 
consequence, not the cause of the general prosperity of a country. Nor would 
the adoption of a different policy from that which recommends the purchase of 
manufactures from foreign countries with the raw produce of domestic agricul- 
ture, improve the situation of these districts. A system of policy which should 
attempt by restraints or encouragements, to divert a portion of the capital and 
industry employed in agriculture or commerce from those channels towards the 
erection of a town, or the establishment of a manufactory, with a view to pro- 
mote the better cultivation of the soil, would be subversive of this end. 

To what causes then must the misery, said by our author to prevail in those 
' provinces, be ascribed, or what has retarded their agricultural improvement? 
The prosperity of agriculture, as well as that of every other branch of industry, 
depends upon the unrestrained operation of individual interest; not only furnish- 
ing motives to exertion, but knowledge to direct that exertion. All that is 
necessary to enable a state to reach the highest pitch of opulence, is not to dis- 
turb the action of this important principle. The obstacles, it will accordingly 
be found, which have opposed the progress of improvement in the countries 
alluded to, may be traced to the interference by the public authorities with the 
salutary operation of this powerful motive of action, or, in other words, to their 
bad laws and political institutions. Sometimes imposing restraints on the 
cultivator, and exposing him to numberless oppressions, either by prescribing 
the mode in which the soil shall be cultivated, or the products it shall yield. 
And, when not thus directly interfering with the business of production, pro- 
hibiting the exportation of the raw produce of the soil, and thereby depriving it 
of the best market. At other times harassing the husbandman with taxation, 
the shameful inequalities of which, whilst they relieve the higher orders, per- 
mit the burden to fall, almost exclusively, on his shoulders, or depriving him 
of the freedom of trade from province to province within his own country; but, 
above all, by perpetuating the inheritance of landed property in particular bodies 
or families, without the power of alienation. These are a few of the corrupt 
and barbarous laws which have retarded the agriculture, not of these particular 
provinces of France only, but of many of the fairest portions of Europe.] 

American Editor. 



CHAP. XI. ON DISTRIBUTION. 389 

in industry, until the completion and sale of their products. Other- 
wise, instead of founding a city, a mere scaffolding is run up, which 
must soon fall to the ground, because it rests upon no solid founda- 
tion. This was the case with regard to Ecatherinoslaw, in the Cri- 
mea; and was, indeed, foreseen by the emperor Joseph II., who 
assisted at the ceremony of its foundation, and laid the second stone 
in due form: "The empress of Russia and myself," said he to his 
suite, " have completed a great work in a single day: she has laid 
the first stone of a city, and I have laid the finishing one." 

Nor will capital alone suffice to set in motion the mass of industry 
and the productive energy necessary to the formation and aggran- 
dizement of a city, unless it present also the advantages of locality 
and of beneficent public institutions. The local position of Washing- 
ton, it should seem, is adverse to its progress in size and opulence; 
for it has been outstripped by most of the other cities of the Union ;(1) 
whereas. Palmyra, in ancient tin?«s, grew both wealthy and popu- 
lous, though in the midst of a sandy desert, solely because it had 
become the entrepot of commerce between Europe and eastern Asia. 
The same advantage gave importance and splendour to Alexandria, 
and, at a still more remote period, to Egyptian Thebes. The mere 
will of a despot could never have made it a city of a hundred gates, 
and of the magni-tude and populousness recorded by Herodotus. Its 
grandeur must have been owing to its vicinity to the Red Sea and 
the channel of the Nile, and to its central position between India and 
Europe.(«) 

If a city can not be raised, neither does it seem, that its further 
aggrandizement can be arrested by the mere fiat of the monarch. 
Paris continued to increase, in defiance of abundance of regulations 
issued by the government of the day to limit its extension. The 
only efi'ectual barrier is that opposed by natural causes, which 
it would be very diflicult to define with precision, for it consists 
rather of an aggregate of little inconveniences, than of any grand or 

(a) There is some stretch of imagination in this. Probably the Egyptian 
Thebes was itself the centre of manufacture and commerce in its day, and not 
its entrepot; indeed, there is no reason to suppose a very active intercourse be- 
tween India and Europe to have existed at so early a period; and, if it had, 
Thebes would hardly have been the entrepot. But central India furnishes itself 
instances of cities containing as large a population. Nineveh and Babylon 
seem to have been quite as populous; each was probably the central point of an 
enormous domestic industry. T. 



(1) [The local position of Washington, perhaps, is not as advantageous as 
that of some of the other cities of the Union; it certainly, however, has not been 
adverse to its progress in population and wealth. In the year 1800, when 
Washington became the seat of the general government, its whole population 
amounted to 3210; according to the census, it contained in 1810, 8,208 inhabit- 
ants, in 1820, 13,247 inhabitants, and in 1830, 18,827 inhabitants. In the year 
1820 the whole number of buildings was 2,208, of which 925 were of brick. 
By the assessment valuation of the year 1830, the whole number of buildings 
was 3,125. It can not, therefore, be said to have been outstripped by most of 
the other cities in the progress of improvement.] American Editor. 



390 



ON DISTRIBUTION. 



BOOK II. 



positive obstruction In overgrown cities, the municipal adminis- 
tration is never well attended to; a vast deal of valuable time is lost 
m going from one quarter to another: the crossing and iosllinff is 
immense in the central parts: and the narrow streets and passages, 
having been calculated for a much smaller population, are unequal to 
the vast increase of horses, carriages, passengers, and traffic of all 
sorts. This evil is felt most seriously at Paris/and accidents are 
growing more frequent every day; yet new streets are now building 
on the same defective plan, with a certain prospect of a like inconve- 
nience in a very few years hence. 



BOOK III. 

OF THE CONSUMPTION OF WEALTH. 



CHAPTER I. 

OF THE DIFFERENT KINDS OP CONSUMPTION. 

In the course of my work, I have frequently been obliged to an- 
ticipate the explanation of terms and notions which in the natural 
order should have been postponed to a later period of the investiga- 
tion. Thus I was objiged in the first book to explain the sense, in 
which I used the term, consumption, because production can not be 
effected without consumption. 

My reader will have seen from the explanation there given, that, 
in like manner as by production is meant the creation, not of sub- 
stance, but of utility, so by consumption is meant the destruction of 
utility, and not of substance, or matter. When once the utility of a 
thing is destroyed, there is an end of the source and basis of its 
value; — an extinction of that, which made it an object of desire and 
of demand. It thenceforward ceases to possess value, and is no lon- 
ger an item of wealth. 

Thus, the terms, to consume to destroy the utility, to annihilate 
the value of any thing, are as strictly synonymous as the opposite 
terms to produce, to cominunicate utility, to create value, and con- 
vey to the mind precisely the same idea. Consumption, then, being 
the destruction of value, is commensurate, not with the bulk, the 
weight, or the number of the products consumed, but with their 
value. Large consumption is the destruction of large value, what- 
ever form that value may happen to have assumed. 

Every product is liable to be consumed; because the value, which 
can be added to, can likewise be subtracted from, any object. If it 
has been added by human exertion or industry, it may be subtracted 
by human use, or a variety of accidents. iJut it can not be more 
than once consumed; value once destroyed can not be destroyed a 
second time. Consumption is sometimes rapid, sometimes gradual. 
A house, a ship, an implement of iron, are equally consumable as a 



392 ON CONSUMPTION. book hi. 

loaf, a joint of meat, or a coat. Consumption again may be but par- 
tial. A horse, an article of furniture, or a house when re-sold by the 
possessor, has been but partially consumed; there is still a residue 
of value, for which an equivalent is received in exchange on the re- 
sale. Sometimes consumption is involuntary, and either accidental, 
as when a house is burnt, or a vessel shipwrecked, or contrary to the 
consumer's intention, as when a cargo is thrown overboard, or stores 
set on fire to prevent their falling into enemies' hands. 

Value may be consumed, either long after its production, or at 
the very moment, and in the very act of production, as in the case 
of the pleasure afforded by a concert, or theatrical exhibition. Time 
and labour may be consumed; for labour, applicable to an useful pur- 
pose, is an object of value, and when once consumed, can never be 
consumed again. 

Whatever can not possibly lose its value is not liable to consump- 
tion. A landed estate can not be consumed; but its annual produc- 
tive agency may; for when once that agency has been exerted, it can 
not be exerted again. The improvements of an estate may be con- 
sumed, although their value may possibly exceed that of the estate 
itself; for these improvements are the efiect of human exertion and 
industry; but the land itself is inconsumable.* 

So likewise it is with any industrious faculty. One may consume 
a labourer's day's work but not his faculty of working; which, 
however, is liable to destruction by the death of the person pos- 
sessing it. 

All products are consumed sooner or later; indeed they are pro- 
duced solely for the purpose of consumption, and, whenever the con- 
sumption of a product is delayed after it has reached the point of 
absolute maturity, it is value inert and neutralized for the time. For 
as all value may be employed re-productively, and made to yield a 
profit to the possessor, the withholding a product from consumption 
is' a loss of the possible profit, in other words, of the interest its 
value would have yielded, if usefully employed.! 

* Some materials are capable of receiving and discharging the same kind of 
value many times over; as linen, which will undergo repeated washing. The 
cleanliness given it by the laundress, is a value wholly consumed on each occa- 
sion, along with a part of that of the linen itself. 

f The values not consumed sooner or later in a useful way are of little mo- 
ment; such are provisions spoiled by keeping, products lost accidentally, and 
those whose use has become obsolete, or which have never been used at all, 
owing to the failure of the demand for them, wherein value originates. Values 
buried, or concealed, are commonly withdrawn but for a time from consumption; 
when found, it is always the interest of the finder to turn them to account, 
which he can not do without submitting them to consumption. In this case, 
the only loss is that of the profit derivable from them during the period of their 
disappearance, and may be reckoned equivalent to the interest for that time. 

The same observation applies to the minute savings, successively laid by 
until the moment of investment, the aggregate of which is, doubtless, conside- 
rable. The loss, resulting from this inertness of capital, maybe partially reme- 
died by moderating the duties on transfer, by extending to the utmost the facility " 
of circulation, and by the establishment of banks of deposite, in which capital 



CHAP. I. ON CONSUMPTION. 393 

But, products being universally destined for consumption, and that 
too in the quickest way, how, it may be asked, can there be ever an 
accumulation of capital, that is to say, of values produced? 

I answer — that value may be accumulated, without being neces- 
sarily vested all the while in the same identical product, provided 
only it be perpetuated in some product or other. Now, values em- 
ployed as capital are perpetuated by reproduction; the various 
products of which capital consists, are consumed like all other pro- 
ducts; but their value is no sooner destroyed by consumption, than 
it re-appears in another, or a similar substance. A manufactory can 
not be kept up, without a consumption of victuals and clothes for 
the workmen, as well as of the raw material of manufacture; but, 
while value in those forms is undergoing consumption, new value is 
communicated to the object of manufacture. The items that com- 
posed the capital so expended, are consumed and gone; but the 
capital — the accumulated value, still exists and re-appears under a 
new form, applicable to a second course of consumption. Whereas, 
if consumed unproductively, it never re-appears at all. 

The annual consumption of an individual is, the aggregate of all 
the values consumed by that individual within the year. The 
annual consumption of a nation is, the aggregate of values consumed 
within the year by all the individuals and communities, whereof the 
nation consists. 

In the estimate of individual or national consumption, must be 
included every kind of consumption, whatever be its motive or 
consequence, whether productive of new value or not; in like man- 
ner, as the estimate of the annual production of a nation comprises 
the total valu« of its products raised within the year. Thus, a soap 
manufactory is said to consume such or such a quantity or value of 
alkali in a year, although this value be re-produced from the manu- 
factory in the shape of soap; on the other hand, it is said to produce 
annually such and such a quantity or value of soap, although the 
production may have cost the destruction of a great variety of 
values, which, if deducted, would vastly reduce the apparent pro- 
duct. By annual production or consumption, national or individual, 
is therefore meant, the gross, and not the net amount.* 

Whence it naturally follows, that all the commodities, which a na- 
tion imports, must be reckoned as part of its annual product, and all 
its exports as part of its annual consumption. The trade of France 
consumes the total value of the silk it exports to the United States; 
and produces, on the other hand, the total value of cotton received 
in return. And, in like manner, the manufacture of France con- 

raay be safely vested, and whence it may readily be withdrawn. In times of 
political confusion, and under an arbitrary government, many will prefer to keej) 
their capital inactive, concealed, and unproductive, either of profit or gratification, 
rather than run the risk of its display. This latter evil is never felt under a 
good government. 

* For the distinction between the gross and the net product, vide supra, Book 
II. chap. 5. 
50 



394 ON CONSUMPTION. book m. 

sumes the value of alkali employed by the soap-boiler, and produces 
the value of soap derived from the concern 

The total annual consumption of a nation, or an individual, is a very 
different thmg from the aggregate of capital. A capital may be 
wholly or partially consumed several times in a year. When a 
shoemaker buys leather, and cuts and works it up i^to shoes, there 
IS so much capital consumed and reproduced. Every time he 
repeats the operation, there is so much more capital consumed, 
buppose the leather purchased to amount to 40 dollars, and the ope- 
ration to be repeated 12 times in the year, there will have been an 
annual consumption of 480 dollars upon a capital of 40 dollars. On 
the other hand, there may be portions of his capital, implements of 
lade, for instance, which it may take several years to consume. Of 
erha ^^ '"^^ consume annually but 1-4 or 1-10 

In each country the wants of the consumer determine the quality 
of he product. The product most wanted is most in demand: and 
that which IS most m demand yields the largest profit to industry, 
capital and land, which are therefore employed in raising his 
particular product in preference; and, ^ice Usa, whenTpfodu t 
becomes less in demand, there is less profit to be got by its produc- 
tion; It IS, therefore, no longer produced. All tL stock on hand 

r^uhtnT^ ""'^i^'"'^ consumption may be divided into the heads of 
public consumption and private consumption; the former is effected 

E^th/r ?r '' "" K ''' 'T''''^ '^' ^^"^^ ^y individuals or faSs 
Either class may be productive or unproductive 

In every community each member is a consumer: for no one can 
subsist, without the satisfaction of some necessary Vants however 
confined and hmited; on the other hand, all, wh^ornotCeo^ 
mere charity, or gratuitous bounty, contribute somehow to produc 
tion, by their industry, their capital, or their land, Xrefore the 
consumers maybe said to be themselves the prodi^ers and he 
great bulk of consumption takes place amongst^he Slfn. and 
^^2::'ZSZ^' ''- --erbalancete"fn5?f- 

dependent for slhZtenceZoiT.^^^ industry, and wholly 

capitalists and landlords S^rlt^sr^^^ faculties, exceeds that of both 
factory, that, with a capLtfay of 120 Joo Inarrwifrn^ T'^ ^"'' ^ '"^""■ 
Its people, 60 dollars, which with thtlii^ *• /I' . P^^ ^^^^^ '" ^^S^^ to 
18,000 dollars peranum if othf«K'J!,°"/^.^''"^?y' ""^^ holidays, makes 
promsof personKneri^tPnLnJ. %' added, 4000 dollars more for the net 
dollars pe?rnnum fofthe reve"^^^^ management, will give a total of 22,000 
in land at but 20 years' PurchaTtn l^ •' 7 ^^°"'' ^^^ ^^™« ^^P^^^l' ^^^ted 

The cultivation m?/?u^°"''^ V^^^ ^ ""^^^""^ of 6000 dollars only, 
them, and thirsuL^rd"faTe7ahn^' very lowest description of farmers, dve to 
land jointly withtet^, '^St a^S by 'Z^Xr^' '''' '' ''' 



CHAP. II. ON CONSUMPTION. 395 

Opulent, civilized, and industrious nations, are greater consumers 
than poor ones, because they are infinitely greater producers. They 
annually, and in some cases, several times in the course of the year, 
re-consume their productive capital, which is thus continually reno- 
vated; and consume, unproductively, the greater part of their reve- 
nues, whether derived from industry, from capital, or from land. 

It is not uncommon to find authors proposing, as the model for 
imitation, those nations whose wants are few; whereas, it is far pre- 
ferable to have numerous wants, along with the power to gratify 
them. This is the way at once to multiply the human species, and 
to give to each a more enlarged existence. 

Stewart* extols the Lacedaemonian policy, which consisted in 
practising the art of self-denial in the extreme, without aiming at 
progressive advancement in the art of production. But herein the 
Spartans were rivalled by the rudest tribes of savages, which are 
commonly neither numerous nor amply provided. Upon this prin- 
ciple, it would be the very acme of perfection to produce nothing 
and to have no wants; that is to say, to annihilate human existence. 



CHAPTER II. 

OF THE EFFECT OF CONSUMPTION IN GENERAL. 

The immediate effect of consumption of every kind is, the loss of 
value, consequently, of wealth, to the owner of the article consumed. 
This is the invariable and inevitable consequence, and should never 
be lost sight of in reasoning on this matter. A product consumed 
is a value lost to all the world and to all eternity ; but the further con- 
sequence, that may follow, will depend upon the circumstances and 
nature of the consumption. 

If the consumption be unproductive, there usually lesults the 
gratification of some want, but no reproduction of value whatever; if 
productive, there results the satisfaction of no wtmt, but a creation 
of new value, equal, inferior, or superior in amount to that consumed, 
and profitable or unprofitable to the adventurer accordingly.! 

* Book II. chap. 14. 

+ This may be illustrated by the bu'wiing of fuel in a grate or furnace. The 
fuel burnt serves, either to give warmth, or to cook victuals, boil dying ingre- 
dients, and the like, and thereby to increase their value. There is no utility in 
the mere gratuitous act of burning, except inasmuch as it tends to satisfy sonie 
human want, that of warmth for instance; in which case, the consumption is 
unproductive; or inasmuch as it confers upon a substance submitted to its action, 
a value, that may replace the value of the fuel consumed; in which case the 
consumption is productive. 

If the fuel, burnt for the sake of warmth, produce either no warmth at all or 
very little; or that burnt to give value to a substance give it no value, or a less 
value, than the value consumed in fuel, the consumption will be ill-judged and 
improvident. 



396 ON CONSUMPTION. book iii. 

Thus, consumption may be regarded as an act of barter, wherein 
the owner of the value consumed gives up that value on the one 
hand, and receives in return, either the satisfaction of a personal 
want, or a fresh value, equivalent to the value consumed 

It may be proper here to remark, that consumption, productive of 
nothmg beyond a present gratification, requires no skill or talent in 
the consumer. It requires neither labour nor ingenuity to eat a 
good dmner, or dress in fine clothes.* On the contrary, productive 
consumption, besides yielding no immediate or present gratifica- 
tion, requires an exertion of combined labour and skill, or, of what 
has all along been denominated, industry. 

When the owner of a product ready for consumption has himself 
no industrious faculty, and wishes, but knows not how to consume 
It productively, he lends it to some one more industrious than him- 
self, who commences by destroying it, but in such a way, as to 
reproduce another, and thereby enable himself to make a full resti- 
tution to tlie lender, after retaining the profit of his own skill and 
abour The value returned consists of different objects from that 
ent. It IS true; indeed, the condition of a loan is in substance this: 
to replace the value ent, of whatever amount, say 2000 dollars, at I 
time specified by other value, equivalent to the same amount of sil- 
ver coin of the like weight and quality at the time of repayment. 
An object, lent on condition of specific restitution, cannot be availa- 
ble for reproduction; because, by the terms of the loan, it is not to 
be consumed. • ? v/i, cv^ 

Sometimes a producer is the consumer of his own product: as 
v^hen the farmer eats his own poultry or vegetables; or the clothier 
wears his own cloth. But, the objects of hu^^ian consumption beh^ 
lar more varied and numerous, than the objects of each person's pro^ 
duction respectively, most operations of consumption are preceded 
by a process of barter. He first turns into money, or recdves in 
mat shape, the values composing his individual revenue; and then 
changes agam that money for the articles he purposes t^ consume. 
WnT. ■^' i" ''°'"'"°'' parlance, to spend and to consume have 
become nearly synonymous. Yet by the mere act of buying, the 

va «: wCh'"' " T '''''J'' ^'^ ''''''' P"-^-^d ^- l^kewte a 
Wn C 1.. ""'^ ^ "^''t^ ^^^^ ^S^"^ f°r ^'hat it cost, if it has not 
been bought over dear. The loss of value does not happen till the 
actual consumption, after which the value is destroyed; it then 
ceases to exist, and is not the object of a second consumption. For 
l^lllT '1 '^'''/" domestic Jife, the bad management of the 
I es Z/T '""^^^^ ' ^^^^^^^'" ^°^'^""^' f°^ «he in'general regu- 
of evnpni ^^.'"""'"iuP^^^" f^^^ ^'"^''^y^ ^^l^i^h is the chief sou?ce 
ot expense, and one that is always recurring. 

larte^incomp'Ji'JS"^'^iv !"l ^ '°'* °^ *^^«"* ^^l^i^i^e in the expenditure of a 
ou?awa£ninr ''1?? ^° '^' P^^oprietor, so as to gratify personal taste, with- 
TlZf'ZiT.lS^"''^ i ''^T' '' f ^"g^ ^"h' ^* '^'''^'' °f humiliation; 
kind of ta ent^t Pubhc good without alarming individual interests. But this 
uponthe?esfofrnnnv'?^/,f^^'V-° ^^'^ ^^^^ of practical, while its influence 
upon the rest of mankind falls within the province of theoretical, morality. 



CHAP. III. ON CONSUMPTION. 397 

This will serve to expose the error of the notion, that where there 
is no loss of money, there can be no loss of wealth. It is the com- 
monest thing in the world to hear it roundly asserted, that the 
money spent is not lost, but remains in the country; and, therefore, 
that the country cannot be impoverished by its internal expenditure. 
It is true, the value of the money remains as before; but the object, 
or the hundred objects, perhaps, that have been successively bought 
with the same money, have been consumed, and their value de- 
stroyed. 

Wherefore, it is superfluous, I had almost said ridiculous, to con- 
fine at home the national money, for the purpose of preserving 
national wealth. Money by no means prevents the consumption of 
value, and the consequent diminution of wealth; on the contrary, it 
facilitates the arrival of consumable objects at their ultimate destina- 
tion; which is a most beneficial act, when the end is well chosen, 
and the result satisfactory. Nor would it be correct even to main- 
tain, that the export of specie is at all events a loss, although its pre- 
sence in the country may be no hindrance to consumption or to the 
diminution of wealth. For unless it be made without any view to 
a return, which is rarely the case, it is in fact the same thing as pro- 
ductive consumption; being merely a sacrifice of one value, for the 
purpose of obtaining another. Where no return whatever is in 
view, there indeed is so much loss of national capital; but the loss 
would be quite as great, were goods, and not money, so exported. 



CHAPTER III. 

OP THE EFFECT OF PRODUCTIVE CONSUMPTION. 

The nature of productive consumption has been explained above, 
in Book I. The value absorbed by it is what has been called Capi- 
tal. The trader, manufacturer, and cultivator, purchase the raw 
material* and productive agency, which they consume in the prepa- 
ration of new products; and the immediate eflect is precisely the 
same as that of unproductive consumption, namely, to create a 
demand for the objects of their consumption, which operates upon 
their price, and upon their production; and to cause a destruction 
of value. But the ultimate effect is difierent; there is no satisfac- 
tion of a human want, and no resulting gratification, except that 
accruing to the adventurer from the possession of the fresh product, 

* The raw materials of manufacture and commerce are, the products bought 
with a view to the communication to them of further value. Calicoes are raw 
material to the calico-printer, and printed calicoes to the dealer who buys them 
for re-sale or export. In commerce, every act of purchase is an act of consump- 
tion; and every act of re-sale an act of reproduction. 



398 ON CONSUMPTION. book iii. 

the value of which replaces that of the products consumed, and com- 
monly affords him a profit into the bargain. 

To this position, that productive consumption does not imme- 
diately satisfy any human want, a cursory observer may possibly 
object, that the wages of labour, though a productive outlay, go to 
satisfy the wants of the labourer, in food, raiment, and amusement 
perhaps. But, in this operation, there is a double consumption; 1. 
Of the capital consumed productively in the purchase of productive 
agency, wherefrom results no human gratification: 2. Of the daily or 
weekly revenue of the labourer, i. e. of his productive agency, the 
recompense for which is consumed unproductively by himself and 
his family, in like manner as the rent of the manufactory, which 
forms the revenue of the landlord, is by him consumed unproduc- 
tively. And this does not imply the consumption of the same value 
twice over, first productively, and afterwards unproductively; for 
the values consumed are two distinct values resting on bases altoge- 
ther different. The first, the productive agency of the labourer, is 
the effect of his muscular power and skill, which is itself a positive 
product, bearing value like any other. The second is a portion of 
capital, given by the adventurer in exchange for that productive 
agency. After the act of exchange is once completed, the consump- 
tion of the value given on either side is contemporaneous, but with a 
different object in view; the one being intended to create anew pro- 
duct, the other to satisfy the wants of the productive agent and his 
family. Thus, the object, expended and consumed by the adven- 
turer, is the equivalent he receives for his capital ; and that, consumed 
unproductively by the labourer, is the equivalent for his revenue. 
The interchange of these two values, by no means makes them one 
and the same. 

So likewise, the intellectual industry of superintendence is repro- 
ductively consumed in the concern; and the profits, accruing to the 
adventurer as its recompense, are consumed unproductively by him- 
self and his family. , 
In short, this double consumption is precisely analogous to that 
of the raw material used in the concern. The clothier presents 
himself to the wool-dealer, with 1000 crowns in his hand; therei 
are, at this moment, two values in existence; on the one side, that^ 
of the 1000 crowns, which is the result of previous production, and ; 
now forms a part of the capital of the clothier; on the other, the; 
wool constituting a part of the annual product of a grazing farm J 
These products are interchanged, and each is separately consumed; ' 
the capital converted into wool, in a way to produce cloth; the pro- 
duct of the farm, converted into crown-pieces, in the satisfaction of 
the wants of the farmer, or his landlord, 

Since every thing consumed is so much lost, the gain of repro- 
ductive consumption is equal, whether proceeding from reduced con- 
sumption, or from enlarged production. In China, they make a great 
saving in the consumption of seed-corn, by following the drilling, 
m lieu of the broad-cast, method. The effect of this saving is pre- 



CHAP. III. ON CONSUMPTION. 399 

cisely the same, as if the land were, in China, proportionately more 
productive than in Europe.* 

In manufacture, when the raw material used is of no value what- 
ever, it is not to be reckoned as forming any part of the requisite 
consumption of the concern; thus, the stone used by the lime- 
burner, and the sand employed by the glass-blower, are no part of 
their respective consumption, wherever they have cost them nothing. 

A saving of productive agency, whether of industry, of land, or 
of capital, is equally real and effectual, as a saving of raw material; 
and it is practicable in two ways; either by making the same pro- 
ductive means yield more agency; or by obtaining the same result 
from a smaller quantity of productive means. 

Such savings generally operate in a very short time to the bene- 
fit of the community at large; they reduce the charges of produc- 
tion; and, in proportion as the economical process becomes better 
understood, and more generally practised, the competition of pro- 
ducers brings the price of the product gradually to a level with the 
charges of production. But, for this very reason, all, who do not 
learn to economise like their neighbours, must necessarily lose, while 
others are gaining. Manufacturers have been ruined by hundreds, 
because they would go to work in a grand style with too costly and 
complex an apparatus, provided of course at an excessive expense 
of capital. 

Fortunately, in the great majority of cases, self-interest is most 
sensibly and immediately affected by a loss of this kind^ and in the 
concerns of business, like pain in the human fi'ame, gives timely 
warning of injuries, that require care and reparation. If the rash 
or ignorant adventurer in production were not the first to suffer the 
punishment of his own errors or misconduct, we should find it far 
more common than it is to dash into improvident speculation; which 
is quite as fatal to public prosperity, as profusion and extravagance. 
A merchant, that spends 10,000 dollars in the acquisition of 6000 
dollars, stands, in respect to his private concerns and to the general 
wealth of the community, upon exactly the same footing, as a man 
of fashion, who spends 4000 dollars in horses, mistresses, gluttony, 
or ostentation; except, perhaps, that the latter has more pleasure 
and personal gratification for his money .t 

* One of the suite of Lord Macartney estimated the saving of grain in China, 
by this method alone, to be equal to the supply of the whole population of Great 
Britain. 

I There is almost insuperable difficulty in estimating with precision the con- 
sumption and production of value; and individuals have no other means of know- 
ing, whether their fortune be increased or diminished, except by keeping regular 
accounts of their receipt and expenditure; indeed, all prudent persons are careful 
to do so, and it is a duty imposed by law in the case of traders. An adventurer 
could otherwise scarcely know whether his concern were gainful or losing, and 
might be involving himself and his creditors in ruin. Besides keeping regular 
accounts, a prudent manager will make previous estimates of the value that will be 
absorbed in the concern, and of its probable proceeds; the use of which, like that 
of a plan or design in building, is to give an approximation, though it can afford 
no certainty. 



400 ON CONSUMPTION. book iii. 

What has been said on this subject in Book I, of this work, 
makes it needless to enlarge here on the head of productive con- 
sumption. I shall, therefore, henceforward direct my reader's at- 
tention to the subject of unproductive consumption, its motives, and 
consequences; premising, that in what I am about to say, the word 
consumption, used alone, will import unproductive consumption, 
as it does in common conversation. 



CHAPTER IV. 

OF THE EFFECT OF UNPRODUCTIVE CONSUMPTION IN GENERAL. 

Having just considered the nature and effect of consumption in 
general, as well as the general effect of productive consumption in 
particular, it remains only to consider in this, and the following 
chapters, such consumption as is effected with no other end or object 
in view, than the mere satisfaction of a want, or the enjoyment of 
some pleasurable sensation. 

Whoever has thoroughly comprehended the nature of consump- 
tion and production, as displayed in the preceding pages, will have 
arrived at the conviction, that no consumption, of the class denomi- 
nated unproductive, has any ulterior effect, beyond the satisfaction 
of a want by the destruction of existing value. It is a mere 
exchange of a portion of existing wealth on the one side, for hu- 
man gratification on the other, and nothing more. Beyond this, 
what can be expected? — reproduction? how can the same identical 
utility be afforded a second time? Wine can not be both drunk and 
distilled into brandy too. Neither can the object consumed serve 
to establish a fresh demand, and thus indirectly to stimulate future 
productive exertion; for- it has already been explained that the only 
effectual demand is created by the possession of wherewithal to 
purchase, — of something to give in exchange; and what can that 
be, except a product, which, before the act of exchange and con- 
sumption, must have been an item, either of revenue or of capital? 
The existence and intensity of the demand must invariably depend 
upon the amount of revenue and of capital, the bare existence of 
revenue and of capital is all that is necessary for the stimulus of 
production, which nothing else can stimulate. The choice of one 
object of consumption necessarily precludes that of another; what is 
consumed in the shape of silks cannot be consumed in the shape of 
linens or woollens; nor can what has once been devoted to pleasure 
or amusement, be made productive also of more positive or substantial 
utility. 

Wherefore, the sole object of inquiry, with regard to unproduc- 
tive consumption, is, the degree of gratification resulting from the 
act of consumption itself; and this inquiry will, in the remainder of 



CHAP. IV. ON CONSUMPTION. 401 

this chapter, be pursued in respect of unproductive consumption in 
general, after which we shall give in the following chapters, a sepa- 
rate consideration to that of individuals, and that of the public, or 
community at large. The sole point is, to weigh the loss, occasioned 
to the consumer by his consumption, against the satisfaction it 
affords him. The degree of correctness, with which the balance of 
loss and gain is struck, will determine whether the consumption be 
judicious or otherwise; which is a point that next to the actual pro- 
duction of wealth, has the most powerful influence upon the well or 
ill-being of families and of nations. 

In this point of view, the most judicious kinds of consumption 
seem? to be: — 

1. Such as conduce to the satisfaction of positive wants; by which 
term I mean those, upon the satisfaction of which depends the exist- 
ence, the health, and the contentment of the generality of mankind; 
being the very reverse of such, as are generated by refined sensua- 
lity, pride and caprice. Thus, the national consumption will, on the 
whole, be judicious, if it absorb articles rather of convenience than 
of display; the more linen and the less lace; the more plain and 
wholesome dishes, and the fewer dainties; the more warm clothing, 
and the less embroidery, the better. In a nation whose consumption 
is so directed, the public establishments will be remarkable rather 
for utility than splendour, its hospitals will be less magnificent than 
salutary and extensive; its roads well furnished with inns, rather 
than unnecessarily wide and spacious, and its towns well paved, 
though with few palaces to attract the gaze of strangers. 

The luxury of ostentation afibrds a much less substantial and solid 
gratification, than the luxury of comfort, if I may be allowed the 
expression. Besides, the latter is less costly, that is to say, involves 
the necessity of a smaller consumption; whereas the former is as 
insatiable; it spreads from one to another, from the mere proneness 
to imitation; and the extent to which it may reach, is as absolutely 
unlimited.(a) "Pride," says Franklin, "is a beggar quite as 
clamorous as want, but infinitely more insatiable." 

Taking society in the aggregate, it will be found that, one with 
another, the gratification of real wants, is more important to the 
community, than the gratification of artificial ones. The wants of 
the rich man occasion the production and consumption of an exqui- 
site perfume, perhaps those of the poor man, the production and 
consumption of a good warm winter cloak; supposing the value to 

(a) It is strange, that so acute a writer should not have perceived, that the 
mischief of pure individual vanity can never be very formidable, because the 
pleasure it alVords loses in intensity, in proportion to its dilTiision. Indeed, as 
far as individual consumption is concerned, attacks upon luxury are mere idle 
declamations; for the productive energies of mankind will always be directed 
towards an object, with a force, and in a degree proportionate to the intensity of 
the want for it. It is the extravagance of public luxury alone that can ever be 
formidable; this, as well as public consumption of every kind, it is always the 
interest of the community at large to contract, and that of public functionaries to 
expand, to the utmost. T. 

51 •* 



402 ON CONSUMPTION. bookiii. 

be equal, the diminution of the general wealth is the same in both 
cases; but the resulting gratification will, in the one case, be trifling, 
transient, and scarcely perceptible; in the other, solid, ample, and 
of long duration.* 

2. Such as are the most gradual, and absorb products of the best 
quality. A nation or an individual, will do wisely to direct con- 
sumption chiefly to those articles, that are the longest time in wear- 
ing out, and the most frequently in use. Good houses and furniture 
are, therefore, objects of judicious preference; for there are few 
products that take longer time to consume than a house, or that are 
of more frequent utility; in fact, the best part of one's life is passed 
in it. Frequent changes of fashion are unwise; for fashion' takes 
upon itself to throw things away long before they have lost their 
utility, and sometimes before they have lost even the freshness of 
novelty, thus multiplying consumption exceedingly, and rejecting 
as good for nothing what is perhaps still useful, convenient, or even 
elegant. So that a rapid succession of fashions impoverishes a state, 
as well by the consumption it occasions, as by that which it arrests. 
There is an advantage in consuming articles of superior quality, 
although somewhat dearer, and for this reason: in every kind of 
manufacture, there are some charges that are always the same, 
whether the product be of good or bad quality. Coarse linen will 
have cost, in weaving, packing, storing, retailing, and carriage, 
before it comes to the ultimate consumer, quite as much trouble and 
labour, as linen of the finest quality, therefore in purchasing an 
inferior quality, the only saving, is the cost of the raw material; the 
labour and trouble must always be paid in full, and at the same rate; 
yet the product of that labour and trouble are much quicker con- 
sumed, when the linen is of inferior, than when it is of superior 
quality. 

This reasoning is applicable indifferently to every class of pro- 
duct; for in every one there are some kinds of productive agency, 
that are paid equally without reference to quality; and that agency 
is more profitably bestowed in the raising of products of good than 
of bad quality; therefore, it is generally more advantageous for a 
nation to consume the former. But this can not be done, unless the 
nation can discern between good and bad, and have acquired taste 
for the former; wherein again appears the necessity of knowledge! to 
the furtherance of national prosperity; and unless, besides, the bulk 
of the population, be so far removed above penury, as not to be 
obliged to buy whatever is the cheapest in the first instance, although 
it be in the long run the dearest to the consumer. 

It is evident, that the interference of public authority in regu- 

* The lending at interest what might have been spent in frivolity is of this 
latter class; for interest can not be paid, unless the loan be productively em- 
J)loyed; in which case it will go in part to the maintenance of the labouring 
classes. 

t By knowledge, I would always be understood to mean, acquaintance with 
the true state of things, or generally with truth in every branch. 



CHAP. IV. ON CONSUMPTION. 403 

lating the details of the manufacture, supposing it to succeed in 
making the manufacturer produce goods of the best quality, which 
is very problematical, must be quite ineffectual in promoting their 
consumption; for it can give the consumer, neither the taste of what 
is of the better quality, nor the ability to purchase. The difficulty 
lies, not in finding a producer, but in finding a consumer. It will 
be no hard matter to supply good and elegant commodities, if there 
be consumers both willing and able to purchase them. But such a 
demand can exist only in nations enjoying comparative affluence; it 
is affluence, that both furnishes the means of buying articles of good 
quality, and gives a taste for them. Now the interference of au- 
thority is not the road to affluence, which results from activity of 
production, seconded by the spirit of frugality;— from habits of 
industry pervading every channel of occupation, and of frugality 
tending to accumulation of capital. In a country, where these 
qualities are prevalent, and in no other can individuals be at all nice 
or fastidious in what they consume. On the contrary, profusion and 
embarrassment are inseparable companions; there is no choice when 
necessity drives. 

The pleasures of the table, of play, of pyrotechnic exhibitions, 
and the like, are to be reckoned amongst those of shortest duration. 
I have seen villages, that, although in want of good water, yet do 
not hesitate to spend in a wake or festival, that lasts but one day, as 
much money as would suffice to construct a conduit for the supply 
of that necessary of life, and a fountain or public cistern on the 
village green; the inhabitants preferring to get once drunk in honour 
of the squire or saint, and to go day after day with the greatest 
inconvenience, and bring muddy water from half a league distance. 
The filth and discomfort prevalent in rustic habitations are attri- 
butable, partly to poverty, and partly to injudicious consumption. 
In most countries, if a part of what is squandered in frivolous 
and hazardous amusements, whether in town or country, were spent 
in the embellishment and convenience of the habitations, in suitable 
clothing, in rieat and useful furniture, or in the instruction of the 
population, the whole community would soon assume an appearance 
of improvement, civilization, and affluence, infinitely more attrac- 
tive to strangers, as well as more gratifying to the people themselves. 
^ 3. The collective consumption of numbers. There are some 
kinds of agency, that need not be multiplied in proportion to the 
increased consumption. One cook can dress dinner for ten as easily 
as for one; the same grate will roast a dozen joints as well as one; 
and this is the reason, why there is so much economy in the mess- 
table of a college, a monastery, a regiment, or a large manufactory, 
in the supply of great numbers from a common kettle or kitchen, 
and in the dispensaries of cheap soups. 

4. And lastly, on grounds entirely different, those kinds of con- 
sumption are judicious, which are consistent with moral rectitude; 
and, on the contrary, those, which infringe its laws, generally end 
in public, as well as private calamity. But it would be too wide a 



404 ON CONSUMPTION. book iir. 

digression from my subject to attempt the illustration of this posi- 
tion. 

It is observable, that great inequality of private fortune is hostile 
to those kinds of consumption, that must be regarded as most judi- 
cious. In proportion as that inequality is more marked, the arti- 
ficial wants of the population are more numerous, the real ones 
more scantily supplied, and the rapid consumption more common 
and destructive. The patrician spendthrifts and imperial gluttons 
of ancient Rome thought they never could squander enough. Be- 
sides, immoral kinds of consumption are infinitely more general, 
where the extremes of wealth and poverty are found blended 
together. In such a state of society, there are a few, who can in- 
dulge in the refinement of luxury, but a vast number, who look on 
their enjoyments with envy, and are ever im.patient to imitate them. 
To get into the privileged class is the grand object, be the means 
ever so questionable; and those who are little scrupulous in the 
acquirement, are seldom more so in the employment of wealth. (a) 

The government has, in all countries, a vast influence, in deter- 
mining the character of the national consumption; not only because 
it absolutely directs the consumption of the state itself, but because 
a great proportion of the consumption of individuals is guided by 
its will and example. If the government indulge a taste for splen- 
dour and ostentation, splendour and ostentation will be the order 
of the day, with the whole host of imitators; and even those of 
better judgment and discretion must, in some measure, yield to 
the torrent. For, how seldom are they independent of that con- 
sideration and good opinion, which, under such circumstances, are 
to be earned, not by personal qualities, but by a course of extrava- 
gance they can not approve? 

First and foremost in the list of injudicious kinds of consumption 
stand those which yield disgust and displeasure, in lieu of the gra- 
tification anticipated. Under this class may be ranged, excess and 
intemperance in private individuals; and, in the state,,wars under- 
taken with the motive of pure vengeance, like that of Louis XIV., 
in revenge for the attacks of a Dutch newspaper, or with that of 
empty glory, which leads commonly to disgrace and odium. Yet 
such wars are even less to be deplored for the waste of national 
wealth and resources, than for the irremediable loss of personal 
virtue and talent sacrificed in the struggle; a loss which involves 

(a) In a wholesome state of society, when public institutions are not need- 
lessly multiplied, and all tend to the common purpose of public good, this very 
impatience and anxiety is conducive to the welfare, and not to the injury, of 
society. Indeed, great inequality of fortune seems to be a necessary accompa- 
niment to social wealth and great national productive power. It is the pros- 
pect of great prizes only, that can stimulate to the extreme, of intellectual and 
corporeal industry; and there is no instance on record of a nation far advanced in 
industry, in which great inequality of fortune has not existed. One bishopric of 
Durham will tempt more clerical adventurers, than five hundred moderate bene- 
fices; and the example of a single Arkvvright or Peele will stimulate manufac- 
turing science and activity more than a whole Manchester of moderate cotton- 
spinning concerns. T. 



CHAP. V. ON CONSUMPTION. 405 

families in distress enough, when exacted by the public good, and 
by the pressure of inexorable necessity; but must be doubly shock- 
ing and afflicting, when it originates in the caprice, the wickedness, 
the folly, or the ungovernable passions of national rulers. 



CHAPTER V. 

OF INDIVIDUAL CONSUMPTION ITS MOTIVES AND ITS EFFECTS. 

The consumption of individuals, as contrasted with that of the 
public or community at large, is such as is made with the object of 
satisfying the wants of families and individuals. These wants 
chiefly consist in those of food, raiment, lodging, and amusement. 
They are supplied with the necessary articles of consumption in 
each department, out of the respective revenue of each family or 
individual, whether derived from personal industry, from capital, 
or from land. The wealth of a family advances, declines, or re- 
mains stationary, according as its consumption equals, exceeds, or 
falls short of its revenue. The aggregate of the consumption of all 
the individuals, added to that of the government for public purposes, 
forms the grand total of national consumption. 

A family, or indeed a community, or nation, may certainly con- 
sume the whole of its revenue, without being thereby impoverished; 
but it by no means follows, that it either must, or would act wisely, 
in so doing. Common prudence would counsel to provide against 
casualties. Who can say with certainty, that his income will not 
fall oiT, or that his fortune is exempt from the injustice, the fraud, 
or the violence of mankind? Lands may be confiscated; ships may 
be wrecked; litigation may involve him in its expenses and uncer- 
tainties. The richest merchant is liable to be ruined by one un- 
lucky speculation, or by the failure of others. Were he to spend 
his whole income, his capital might, and in all probability would, 
be continually on the decline. 

But, supposing it to remain stationary, should one be content 
with keeping it so? A fortune, however large, will seem little 
enough, when it comes to be divided amongst a number of children. 
And, even if there be no occasion to divide it, what harm is there in 
enlarging it; so it be done by honourable means? what else is it, 
but the desire of each individual to better his situation, that suggests 
the frugality that accumulates capital, and thereby assists the pro- 
gress of industry, and leads to national opulence and civilization? 
Had not previous generations been actuated by this stimulus, the 
present one would now be in the savage state; and it is impossible to 
say, how much farther it may yet be possible to carry civilization. 
It has never been proved to my satisfaction, that nine-tenths of the 



406 ON CONSUMPTION. book iii. 

population must inevitably remain in that degree of misery and 
semi-barbarism, which they are found in at present in most coun- 
tries of Europe. 

The observance of the rules of private economy keeps the con- 
sumption of a family within reasonable bounds: that is to say, the 
bounds prescribed in each instance by a judicious comparison of the 
value sacrificed in consumption, with the satisfaction it affords. 
None but the individual himself, can fairly and correctly estimate 
the loss and the gain, resulting to himself or family from each par- 
ticular act of consumption; for the balance will depend upon the 
fortune, the rank, and the wants of himself and family; and, in some 
degree, perhaps, upon personal taste and feelings. To restrain con- 
sumption within too narrow limits, would involve the privation of 
gratification, that fortune has placed within reach, and, on the other 
hand, a too profuse consumption might trench upon resources, that 
it might be but common prudence to husband.* 

Individual consumption has constant reference to the character 
and passions of the consumer. It is influenced alternately by the 
noblest and the vilest propensities of our nature; atone time it is 
stimulated by sensuality; at another by vanity, by generosity, by 
revenge, or even by covetousness. It is checked by prudence or 
foresight, by groundless apprehension, by distrust, or by selfishness. 
As these various qualities happen in turn to predominate, they direct 
mankind in the use they make of their wealth. In this, as in every 
other action of life, the line of true wisdom is the most difficult to 
observe. Human infirmity is perpetually deviating to the one side 
or the other, and seldom steers altogether clear of excess.t 

In respect to consumption, prodigality and avarice are the two 
faults to be avoided: both of them neutralize the benefits that wealth 
IS calculated to confer on its possessor; prodigality by exhausting 
avarice by not using, the means of enjoyment. Prodigality is' 
indeed, the more amiable of the two, because it is allied to many 
amiable and social qualities. It is regarded with more indulgence 
because it imparts its pleasures to others; yet it is of the two the 
more mischievous to society; for it squanders and makes away with 
the capital that should be the support of industry; it destroys indus- 

* On this ground sumptuary laws are superfluous and unjust. The indulgence 
proscribed is either within the means of the individual or not: in the former . 
case, it is an act of oppression to prohibit a gratification involving no iniurv to J 
others, equally unjustifiable as prohibition in any other particular; in the latter A 
It is at all events nugatory to do so; for there is no occasion for leeal interfe- 
rence, where pecuniary circumstances alone. are an eflfectual bar. Every irregu- 
larity of this kind works its own punishment. It has been said, that it is the 
nS • .^ government to check those habits, which have a tendency to lead 
people into expenses exceeding their means, but it will be found, that such 
authnriS';S;^ be introduced by the example and encouragement of the public 
wmlTtT^^A^ \^^\ ^'^'^ «i''«"™stances, neither custom nor fashion 

Tu^bTe^VtreiiXee^rLtr '' "^^"^ '""'^ ^"^ ^^p^"^^^' '^' -^^* - 



cHAP.v. ON CONSUMPTION. 407 

try, the grand agent of production, by the destruction of the other 
agent, capital. If, by expense and consumption, are meant those kinds 
only which minister to our pleasures and luxuries, it is a great mis- 
take to say that money is good for nothing but to be spent, and that 
products are only raised to be consumed. Money may be employed 
in the work of reproduction; when so employed it must be produc- 
tive of great benefit; and, every time that a fixed capital is squander- 
ed, a corresponding quantity of industry must be extinguished, in 
some quarter or other. The spendthrift, in running through his for- 
tune, is at the same time exhausting, pro tmito, the source of the 
profits upon industry. 

The miser, who, in the dread of losing his money, hesitates to turn 
it to account, does, indeed, nothing to promote the progress of indus- 
try; but at least he can not be said to reduce the means of produc- 
tion. His hoard is scraped together by the abridgment of his per- 
sonal gratifications, not at the expense of the public, according to the 
vulgar notion; it has been withdrawn from no productive occupation, 
and will at any rate re-appear at his death, and be available for the 
purpose of extending the operations of industr)', if it be not squander- 
ed by his heirs, or so effectually concealed, as to evade all search or 
recovery. 

It is absurd in spendthrifts to boast of their prodigality, which is 
quite as unworthy the nobleness of our nature, as the sordid mean- 
ness of the opposite character. There is no merit in consuming all 
one can lay hands upon, and desisting only when one can get no 
more to consume; every animal can do as much; nay, there are some 
animals that set a better example of provident management. It is 
more becoming the character of a being gifted with reason and fore- 
sight, never to consume, in any instance, without some reasonable 
object in view. At least, this is the course that economy would 
prescribe. 

In short, economy is nothing more than the direction of human 
consumption with judgment and discretion, — the knowledge of our 
means, and of the best mode of employing them. There is no fixed 
rule of economy; it must be guided by a reference to the fortune, 
condition, and wants of the consumer. An expense, that may be 
authorized by the strictest economy in a person of moderate for- 
tune, would, perhaps, be pitiful in a rich man, and absolute extrava- 
gance in a poor one. In a state of sickness, a man must allow him- 
self indulgences, that he would not think of in health. An act of 
beneficence, that trenches on the personal enjoyments of the bene- 
factor, is deserving of the highest praise; but it would be highly 
blamable, if done at the expense of his children's subsistence. 

Economy is equally distant from avarice and profusion. Avarice 
hoards, not for the purpose of consuming or reproducing, but for the 
mere sake of hoarding; it is a kind of instinct, or mechanical im- 
pulse, much to the discredit of those in whom it is detected; 
whereas, true economy is the offspring of prudence and sound rea- 
son, and does not sacrifice necessaries to superfluities, like the miser, 



408 ON CONSUMPTION. book iii. 

when he denies himself present comforts, in the view of luxury, 
ever prospective and never to be enjoyed. The most sumptuous 
entertainment may be conducted with economy, without diminish- 
ing, but rather adding to its splendour, which the slightest appear- 
ance of avarice would tarnish and deface. The economical man 
balances his means against his present or future wants, and those of 
his family and friends, not forgetting the calls of humanity. The 
miser regards neither family nor friends; scarcely attends to his own 
personal wants, and is an utter stranger to those of mankind at large. 
Economy never consumes without an object; avarice never willing- 
ly consumes at all; the one is a sober and rational study, the only 
one that supplies the means of fulfilling our duties, and being at the 
same time just and generous; the other a vile propensity to sacri- 
fice every thing to the sordid consideration of self. 

Economy has not unreasonably been ranked among the virtues of 
mankind; for, like the other virtues, it implies self-command and 
control; and is productive of the happiest consequences; the good 
education of children, physical and moral; the careful attendance of 
old age; the calmness of mind, so necessary to the good conduct of 
middle life; and that independence of circumstances which alone 
can secure against mercenary motives, are all referable to this 
quality. Without it there can be no liberality, none at least of a 
pernianent and wholesome kind; for, when it degenerates into 
prodigality, it is an indiscriminate largess, alike to deserving and 
undeserving; stinting those who have claims in favour of those who 
have none. It is common to see the spendthrift reduced to beg a 
favour from people that he has loaded with his bounty; for what he 
gives now, one expects a return will some day be called for; 
whereas, the gifts of the economical man are purely gratuitous; for 
he never gives except from his superfluities. The latter is rich with 
a moderate fortune; but tlie miser and the prodigal are poor, though 
in possession of the largest resources. 

Economy is inconsistent with disorder, which stumbles blindfold 
over wealth, sometimes missing what it most desires, although close 
within its reach, and sometimes seizing and devouring what it is 
most interested in preserving; even impelled by the occurrences of 
the moment, which it either can not foresee, or can not emancipate 
itself from; and always unconscious of its own position, and utterly 
incapable of choosing the proper course for the future. A house- 
hold, conducted without order, is preyed upon by all the world: 
neither the fidelity of the servants, nor even the parsimony of the 
master, can save it from ultimate ruin. For it is exposed to the 
perpetual recurrence of a variety of little outgoings, on every occa- 
sion, hov/ever trivial.* 

* I remember being once in the country a witness of the numberless minute 
losses that neglectful housekeeping entails. For want of a trumpery latch, the 
gate of the poultry-yard was forever open: there being no means of closing it 
externally, it was on the swing every time a person went out; and many of the 



CHAP. V. ON CONSUMPTION. 409 

Among the motives that operate to determine the consumption 
of individuals, the most prominent is luxury, that frequent theme 
of declamation, which, however, I should probably not have dwelt 
upon, could I expect that every body would take the trouble of ap- 
plying the principles I have been labouring to establish; and were 
it not always useful to substitute reason for declamation. 

Luxury has been defined to be, the use of superfluities.* For my 
own part, I am at a loss to draw the line between superfluities and 
necessaries; the shades of difference are as indistinct and completely 
blended as the colours of the rainbow. 

Taste, education, temperament, bodily health, make the degrees 
of utility and necessity infinitely variable, and render it impossible 
to employ, in an absolute sense, terms, which always of necessity 
convey an idea of relation and comparison. 

The line of demarcation between necessaries and superfluities shifts 
with the fluctuating condition of society. Strictly speaking, man- 
kind might exist upon roots and herbs, with a sheepskin for cloth- 
ing, and a wigwam for lodging; yet, in the pi'esent state of Euro- 
ropean society, we cannot look upon bread or butcher's meat, wool- 
len-clothes or houses of masonry, as luxuries. For the same reason, 
the line varies also according to the varying circumstances of indi- 
vidual fortune; what is a necessary in a large town, or in a particu- 
lar line of life, may, in another line of life, or in the country, be a 
mere superfluity. Wherefore, it is impossible exactly to define the 
boundary between the one and the other. Smith has fixed it a little 
in advance of Steuart; including in the rank of necessaries, besides 
natural wants, such as the established rules of decency and propriety 
have made necessary in the lower classes of society. But Smith 
was wrong in attempting to fix at all what must, in the nature of 
things, be ever varying. 

Luxury may be said, in a general way, to be, the use or consump- 

poultry were lost in consequence. One day a fine young porker made his es- 
cape into the woods, and the whole family, gardener, cook, milk-maid, &c., 
presently turned out in quest of the fugitive. The gardener was the first to dis- 
cover the object of pursuit, and in leaping a ditch to cut off his further escape, 
got a sprain that confined him to his bed for the next fortnight: the cook found 
the linen burnt that she had left hung up before the fire to dry; and the milk- 
maid, having forgotten in her haste to tie up the cattle properly in the cow-house, 
one of the loose cows liad broken the leg of a colt that happened to be kept in 
the same shed. The linen burnt and the gardener's work lost, were worth full 
twenty crowns; and the colt about as much more: so that here was a loss in a 
few minutes of forty crowns, purely for want of a latch that might have cost a 
few sous at the utmost; and this in a household where the strictest economy was 
necessary, to say nothing of the suffering of the poor man, or the anxiety and 
other troublesome incidents. The misfortune was to be sure not very serious, 
nor the loss very heavy; yet when it is considered, that similar neglect was the 
occasion of repeated disasters of the same kind, and ultimately of the ruin of a 
worthy family, it was deserving of some little attention. 

* Steuart, Essay on Pol. Econ. hook ii. c. 20. The same writer has in another 
passage observed, that every thing not absolutely necessary to bare existence is 
a superfluity, 
52 



410 ON CONSUMPTION. pooK iii. 

tion of dear articles; for the term dear is one of relation, and, there- 
fore, may be properly enough applied in the definition of another 
term, whose sense is likewise relative. Luxury* with us in France 
conveys the idea rather of ostentation than of sensuality ; applied to 
dress, it denotes rather the superior beauty and impression upon the 
beholder, than superior convenience and comfort to the wearer; ap- 
plied to the table, it means rather the splendour of a sumptuous ban- 
quet, than the exquisite fare of the solitary epicure. The grand aim 
of luxury in this sense is to attract admiration by the rarity, the cost- 
liness, and the magnificence of the objects displayed, recommended 
probably neither by utility, nor convenience, nor pleasurable quali- 
ties, hut merely by their dazzling exterior and effect upon the opi- 
nions of mankind at large. Luxury conveys the idea of ostentalion; 
but ostentation has itself a far more extensive meaning, and compre- 
hends every quality assumed for the purpose of display. A man 
may be ostentatiously virtuous, but is never luxuriously so; for 
luxury implies expense. Thus, luxury of wit or genius is a meta- 
phorical expression, implying a profuse display or expenditure, if it 
may be so called, of those qualities of the intellect, which it is the 
characteristic of good taste to deal out with a sparing hand. 

Although, with us in France, what we term luxury is chiefly 
directed to ostentatious indulgence, the excess and refinement of sen- 
suality are equally unjustifiable, and of precisely similar effect: that 
is to say, of a frivolous and inconsiderable enjoyment or satisfaction, 
obtained by a large consumption, calculated to satisfy more urgent 
and extensive wants. But I should not stigmatize as luxury that 
degree of variety or abundance, which a prudent and well-informed 
person in a civilized community would like to see upon his table 
upon domestic and common occasions, or aim at in his dress and abode, 
when under no compulsion to keep up an appearance. I should call 
this degree of indulgence judicious and suitable to his condition, but 
not an instance of luxury. 

Having thus defined the term luxury, we may go on to investi- 
gate its effect upon the well-ordering or economy of nations. 

Under the head of unproductive consumption is comprised the 
satisfaction of many actual and urgent wants, which is a purpose of 
sufficient consequence to outweigh the mischief, that must ensue from 
the destruction of values. But what is there to compensate that mis- 
chief, where such consumption has not for its object the satisfaction 
of such wants? where money is spent for the mere sake of spend- 
ing, and the value destroyed without any object beyond its destruc- 
tion? 

It is supposed to be beneficial, at all events, to the producers of 
the articles consumed. But it is to be considered, that the same 
expenditure must take place, though not, perhaps, upon objects quite 

* The English term luxury has a much more sensual meaning than the 
French luxe, and seems to comprise both luxe and luxure, the luxus, or luxuria, 
and luxuries of the Latin writers. 



CHAP. V. ON CONSUMPTION. 411 

so frivolous; for the money withheld from luxurious indulgences 
is not absolutely thrown into the sea; it is sure to be spent either 
upon more judicious gratifications or upon reproduction. In one 
way or other, all the revenue, not absolutely sunk or buried, is con- 
sumed by the receiver of it, or by some one in his stead; and in all 
cases whatever, the encouragement held out by consumption to the 
producer is co-extensive with the total amount of revenue to be 
expended. Whence it follows: 

1. That the encouragement which ostentatious extravagance 
affords to one class of production is necessarily withdrawn from 
another. 

2. That the encouragement resulting from this kind of consump- 
tion cannot increase, except in the event of an increase in the reve- 
nue of the consumers: which revenue, as we can not but know by 
this time, is not to be increased by luxurious, but solely by repro- 
ductive consumption. 

How great, then, must be the mistake of those, who, on observing 
the obvious fact, that the production always equals the consumption, 
as it must necessarily do, since a thing can not be consumed before 
it is produced, have confounded the cause with the effect, and laid it 
down as a maxim, that consumption originates production; there- 
fore, that frugality is directly adverse to public prosperity, and that 
the most useful citizen is the one who spends the most. 

The partisans of the two opposite systems above adverted to, the 
economists, and the advocates of exclusive commerce, or the balance 
of trade, have made this maxim a fundamental article of their creed. 
The merchants and manufacturers, who seldom look beyond the 
actual sale of their products, or inquire into the causes, which may 
operate to extend their sale, have warmly supported a position, ap- 
parently so consistent with their interests; the poets, who are ever 
apt to be seduced by appearances, and do not consider themselves 
bound to be wiser than politicians and men of business, have been 
loud in the praise of luxury;* and the rich have not been backward 

* Though it is not every subject that allows equal scope to poetical genius, 
it does not seem, that error affords a finer field than truth. The lines of Fol' 
taire on the system of the world, and on the discoveries of Newton regarding the 
properties of light, are strictly conformable to the rules of science, and nowise 
inferior in beauty to those of Lucretius on the fanciful dogmas of the Epicurean 
school. But if Voltaire had been better acquainted with the principles of poli- 
tical economy, he would never have given utterance to such sentiments as the 
following: 

Sachez surtout que le luxe enrichii 

Un grand etat, s^tl en perd un petit. 

Cette splendeur, cette pompe mondaine, 

D'un regne heureux est la marqe certain. 

Le riche est ne pour beaucoup depenser .... 

The progress of science compels those, who covet literary fame, to make 
themselves acquainted with general principles at the least; without a close ad- 
herence to truth and nature, there is little chance of permanent reputation, even 
in the poetical department. 



412 ON CONSUMPTION. book hi. 

in adopting principles, that exalt their ostentation into a virtue, and 
their self-gratification into beneficence."^ 

This prejudice, however, must vanish, as the increasing knowledge 
of political economy begins to reveal the real sources of wealth, the 
means of production, and the effect of consumption. Vanity may 
take pride in idle expense/ but will ever be held in no less contempt 
by the wise, on account of its pernicious effects, than it has been all 
along, for the motives by which it is actuated. 

These conclusions of theory have been confirmed by experience. 
Misery is the inseparable companion of luxury. The man of wealth 
and ostentation squanders upon costly trinkets," sumptuous repasts, 
magnificent mansions, dogs, horses, and mistresses, a portion of 
value, which,vested in productive occupation, would enable a mul- 
titude of willing labourers, whom his extravagance now consigns to 
idleness and misery, to provide themselves with warm clothing, 
nourishing food, and household conveniences. The gold buckles 
of the rich man leave the poor one without shoes to his feet; and 
the labourer will want a shirt to his back, while his rich neighbour 
glitters in velvet and embroidery. 

It is vain to resist the nature of things. Magnificence may do 
what it will to keep poverty out of sight, yet it will cross it at every 
turn, still haunting, as if to reproach it for its excesses. This con- 
trast was to be met with at Versailles, at Rome, at Madrid, and in 
every seat of royal residence. In a recent instance, it occurred in 
France in an afflicting degree, after a long series of extravagant and 
ostentatious administration; yet the principle is so undeniable, that 
one would not suppose it had required so terrible an illustration.! 

* La Repuhlique a Men affaire 
De Gens, qui ne depensent rien; 
Je ne sais (Vhomme necessaire. 
Que celui dont le luxe epand beaucoup de Men. 

La Fontaine, Avantagedela Science. 

"Were the rich not to spend their money freely," says Montesquieu, "the 
poor would starve." Esprit des Lois, liv. vii. c. 4. 

I There are other circumstances, that contribute to veil the residence of the 
court in an atmosphere of human misery. It is there, that personal service is 
consumed by wholesale; and that is of all things the most rapidly consumed 
being, indeed, consumed as fast as produced. Under this denomination, i'j to 
be comprised the agency of the soldiery, of menial servants, of public function- 
aries, whether useful or not, of clerks, lawyers, judges, civilians, ecclesiastics, 
actors, musicians, drolls, and numerous other hangers on, who all crowd to- 
wards the focus of power and occupation, civil, judicial, military, or religious. It 
IS there also, that material products seem to be more wantonly consumed. The 
choicest viands, the most beautiful and costly stuffs, the rarest works of art and 
fashion, all seem emulous to reach this general sink, whence little or nothino- 
ever emerges. ^ 

Yet, if the accumulated values, that are drained from every quarter of the na- 
tional territory to feed the consumption of the seat of royalty, were distributed 
with any regard to equity, they would probably suffice to maintain all classes in 
comfort and plenty. Though such drains must always be calamitous, because 
they absorb value, and yield no return, at any rate the local population might be 
pretty well off; but it is nptorious that wealth is no where less equally diffused. 



1 



CHAP. V. ON CONSUMPTION. 413 

Those who are little in the habit of looking through the ajipear- 
ance to the reality of things, are apt to be seduced by the glitter and 
the bustle of ostentatious luxury. They take the display of con- 
sumption as conclusive evidence of national prosperity. If they 
could open their eyes, they would see, that a nation verging to- 
wards decline will for some time continue to preserve a show of 
opulence; like the establishment of a spendthrift on the high road 
to ruin. But this false glare can not last long; the effort dries up 
the sources of reproduction, and, therefore, must infallibly be fol- 
lowed by a state of apathy and exhaustion of the political frame, 
which is only to be remedied by slow degrees, and by the adoption 
of a regimen the very reverse of that, by which it has thus been 
deduced. 

It is distressing; to see the fatal habits and customs of the nation 
one is attached to by birth, fortune, and social affection, extending 
their influence over the wisest individuals, and those best able to 
appreciate this danger and foresee its disastrous consequences. The 
number of persons, who have sufficient spirit and independence of 
fortune to act up to their principles, and set themselves forward as 
an example, is extremely small. Most men yield to the torrent, and 
rush on ruin with their eyes open, in search of happiness; although 
it requires a very small share of philosophy to see the madness of 
this course, and to perceive, that, when once the common wants of 
nature are satisfied, happiness is to be found, not in the frivolous 
enjoyments of luxurious vanity, but in the moderate exercise of our 
physical and moral faculties. 

Wherefore, those, who abuse great power, or talent, by exerting 
it in diffusing a taste for luxury, are the worst enemies of social hap- 
piness. If there is one habit, that deserves more encouragement 
than another, in monarchies as well as republics, in great as well as 
small, it is this of economy. Yet, after all, no encouragement is 
wanted; it is quite enough to withdraw favour and honour from 
habits of profusion; to afford inviolable security to all savings and 
acquirements; to give perfect freedom to their investment and occu- 
pation in every branch of industry, that is not absolutely criminal. 

It is alleged, that, to excite mankind to spend, or consume, is to 
excite them to produce, inasmuch as they can only spend what they 
may acquire. This fallacy is grounded on the assumption, that 
production is equally within the ability of mankind as consumption; 
that it is as easy to augment as to expend one's revenue. But, sup- 
posing it were so, nay further, that the desire to spend, begets a 

The prince, the favourite, a mistress, or a bloated peculator, takes the lion's 
share, leaving to tlie subordinate drones the pittance assigned to them by the 
generosity or caprice of their superiors. 

The residence of an overgrown proprietor upon his estate then only tends to 
diffuse abundance and cheerfulness around him, when his expenditure is directed 
to objects of utility, rather than of pomp; in wliich case he is really an adven- 
turer in agriculture, and an accumulator of capital in the shape of improvements 
and ameliorations. 



414 ON CONSUMPTION. book iir. 

liking for labour, although experience by no means warrants such a 
conclusion, yet there can be no enlargement of production, without 
an augmentation of capital, which is one of the necessary elements 
of production; but it is clear, that capital can only be accumulated 
by frugality; and how can that be expected from those, whose only 
stimulus to production is the desire of enjoyment. 

Moreover, when the desire of acquirement is stimulated by the 
love of display, how can the slow and limited progress of real pro- 
duction keep pace with the ardour of that motive? Will it not find a 
shorter road to its object, in the rapid and disreputable orofits of 
jobbing and intrigue, classes of industry most fatal to national wel- 
fare, because they produce nothing themselves, but only aim at 
appropriating a share of the products of other people? It is this 
motive, that sets in motion the despicable art and cunning of the 
knave, leads the pettifogger to speculate on the obscurity of the 
laws, and the man of authority to sell to folly and wickedness that 
patronage which it is his duty to dispense gratuitously to merit and 
to right. Pliny mentions having seen Paulina at a supper, dressed in 
a network of pearls and emeralds, that cost 40 millions of sesterii,{\) 
as she was ready to prove by her jeweller's bills. It was bought 
with the fruit of her ancestor's speculations. " Thus," says the 
Roman writer, "it was to dress out his grand-daughter in jewels at 
an entertainment, that Lollius forgot himself so far, as to lay waste 
whole provinces, to become the object of detestation to the Asiatics 
he governed, to forfeit the favour of Caesar, and end his life by 
poison." 

This is the kind of industry generated by love of display. 

If it be pretended, that a system, which encourages profusion, 
operates only upon the wealthy, and thus tends to a beneficial end, 
inasmuch as it' reduces the evil of the inequality of fortune, there 
can be little diificulty in showing, that profusion in the higher, begets 
a similar spirit in the middling and lower classes of society, which 
last must, of course, the soonest arrive at the limits of their income; 
so that, in fact, universal profusion has the efiect of increasing, 
instead of reducing that inequality. Besides the profusion of the 
wealthier class is always preceded, or followed, by that of the govern- 
ment, which must be fed and supplied by taxation, that is always 
sure to fall more heavily upon small incomes than on large ones.* 

* In favour ofluxury, the following paradoxical argument has been advanced; 
for what is too ridiculous to be hazarded in such a cause! " That since luxury 
consumes superfluities only, the objects it destroys are of little real utility, and 
therefore the loss to society can be but small." There is this ready answer: the 
value of the objects consumed by luxury must have been reduced by the compe- 
tition of producers to a level with the charges of production, wherein are com- 
prised the profits of the producers. Objects of luxury are equally the product 
of land, capital, and industry, which might have been employed in raising ob- 
jects of real utility, had the demand taken that direction; for production inva- 
riably accommodates itself to the taste of the consumers. 

(1) [About 140,000 dollars. Some English ladies wear jewels of greater 



CHAP. V. ON CONSUMPTION. 415 

The apologists of luxury have sometimes gone so far as to cry up 
the advantages of misery and indigence; on the ground, that, without 
the stimulus of w^ant, the lower classes of mankind could never be 
impelled to labour, so that neither the upper classes, nor society at 
large, could have the benefit of their exertions. 

Happily, this position is as false in principle as it would be cruel 
in practice. Were nakedness a sufficient motive of exertion, the 
savage would be the most diligent and laborious, for he is the nearest 
to nakedness, of his species. Yet his indolence is equally notorious 
and incurable. Savages will often fret themselves to death, if com- 
pelled to work. It is observable throughout Europe, that the laziest 
nations are those nearest approaching to the savage state; a mechanic 
in good circumstances, at London or Paris, would execute twice as 
much work in a given time, as the rude mechanic of a poor district. 
Wants multiply as fast as they are satisfied; a man who has a jacket 
is for having a coat: and, when he has his coat, he must have a great 
coat too. The artizan, that is lodged in an apartment by himself, 
extends his views to a second; if he has two shirts, he soon wants a 
dozen, for the comforts of more frequent change of linen; whereas, 
if he has none at all, he never feels the want of it. No man feels 
any disinclination to make a further acquisition, in consequence of 
having made one already. 

The comforts of the lower classes are, therefore, by no means in- 
compatible with the existence of society, as too many have main- 
tained. The shoemaker will make quite as good shoes in a warm 
room, with a good coat to his back, and wholesome food for himself 
and his family, as when perishing with cold in an open stall; he is 
not less skilful or inclined to work, because he has the reasonable 
conveniences of life. Linen Is4\'ashed as well in England, where 
washing is carried on comfortably within doors, as where it is exe- 
cuted in the nearest stream in the neighbourhood. 

It is time for the rich to abandon the puerile apprehension of los- 
ing the objects of their sensuality, if the poor man's comforts be pro- 
moted. On the contrary, reason and experience concur in teaching, 
that the greatest variety, abundance, and refinement of enjoyment 
are to be found in those countries, where wealth abounds most, and 
is the most widely diifused. 

value; but some read the passage in Pliny Quadringenties, instead of Quadragtes 
Sestertium. This would make the jewels of Paulina worth 1,400,000 dollars; 
the more probable sum.] American Editor. 



416 ON CONSUMPTION. book hi.' 



4 



CHAPTER VI. 

ON PUBLIC CONSUMPTION. 

Section I. 
Of the Nature and general EJ^ect of Public Consumption. 

Besides the wants of individuals and of families which it is the 
object of private consumption to satisfy, the collection of many indi- 
viduals into a community gives rise to a new class of wants, the' 
wants of the society in its aggregate capacity, the satisfaction of 
which is the object of public consumption. The public buys and 
consumes the personal service of the minister, that directs its affairs, 
the soldier, that protects it from external violence, the civil or crimi- 
nal judge, that protects the rights and interests of each member 
against the aggression of the rest. All these different vocations have 
their use, although they may often be unnecessarily multiplied or 
overpaid; but that arises from a defective political organization, 
which it does not fall within the scope of this work to investigate. 

We shall see presently whence it is, that the public derives all the 
values, wherewith it purchases the services of its agents, as well as 
the articles its wants require. All we have to consider in this chap- 
ter is, the mode in which its consumption is effected, and the conse- 
quences resulting from it. 

If I have made myself understood in the commencement of this 
third book, my readers will have no difficulty in comprehending, 
that public consumption, or that which takes place for the general 
utility of the whole community, is precisely analogous to that con- 
sumption, which goes to satisfy the wants of individuals or families. 
In either case, there is a destruction of values, and a loss of wealth; 
although, perhaps, not a shilling of specie goes out of the country. 

By way of insuring conviction of the truth of this position, let us 
trace from first to last the passage of a product towards ultimate con- 
sumption on the public account. 

The government exacts from a tax-payer the payment of a given 
tax in the shape of money. To meet this demand, the tax-payer 
exchanges part of the products at his disposal for coin, which he 
pays to the tax-gatherer:* a second set of government agents is 

* Although the capitalist and landholder receive their interest an-d rent origi- 
nally in the shape of money, and have, therefore, no occasion to go through any 
previous act of exchange, to obtain wherewithal to pay the tax, yet such a pre- 
vious exchange must have been eifected by the adventurer, who turns the land 
or capital to account. The effect is precisely the same, as if the rent or interest 
had been paid in kind; that is, in the immediate products of the land or capital; 
and the landholder or capitalist had paid the tax either by the direct transfer of 



CHAP. VI. ON CONSUMPTION. 417 

busied in buying with thai coin, cloth and other necessaries for 
the soldiery. Up to this point, there is no value lost or consumed: 
there has only been a gratuitous transfer of value, and a subsequent 
act of barter: but the value contributed by the subject still exists in 
the shape of stores and supplies in the military depot. In the end, 
however, this value is consumed; and then the portion of wealth, 
which passes from the hands of the tax-payer into those of the tax- 
gatherer, is destroyed and annihilated. 

Yet it is not the sum of money that is destroyed: that has only 
passed from one hand to another, either without any return, as when 
it passed from the tax-payer to the tax-gatherer; or in exchange for 
an equivalent, as when it passed from the government agent to the 
contractor for clothing and supplies. The value of the money sur- 
vives the whole operation, and goes through three, four, or a dozen 
hands, without any sensible alteration; it is the value of the clothing 
and necessaries that disappears, with precisely the same effect, as if 
the tax-payer had, with the same money, purchased clothing and 
necessaries for his own jjrivate consumption. The sole difference 
is, that the individual in the one case, and the state in the other, 
enjoys the satisfaction resulting from that consumption. 

The same reasoning may be easily applied to all other kinds of 
public consumption. When the money of the tax-payer goes to 
pay the salary of a public officer, that officer sells his time, his tal- 
ents, and his exertions, to the public, all of which are consumed for 
public purposes. On the other hand, that officer consumes, instead 
of the tax-payer, the value he receives in lieu of his services; in 
the same manner as any clerk or person in the private employ of 
the tax-payer would do. 

There has been long a prevalent notion, that the values, paid by 
the community for the public service, return to it again in some 
shape or other; in the vulgar phrase, that what government and its 
agents receive^ is refunded again by their expenditure. This is a 
gross fallacy; but one that has been productive of infinite mis- 
chief, inasmuch as it has been the pretext for a great deal of shame- 
less waste and dilapidation. The value paid to government by the 
tax-payer is given without equivalent or return: it is expended by 
the government in the purchase of personal service, of objects of 
consumption; in one word, of products of equivalent value, which 
are actually transferred. Purchase or exchange is a very different 
thing from restitution.* 

Turn it which way you will, this operation, though often very 

part of those products, or by first selling them, and afterwards paying over the 
proceeds. On this subject, vide supra. Book II. chap. 5, for the mode in which 
revenue is distributed amongst the community. 

* Dr. Hamilton, in his valuable tract upon The National Debt of Great Bri- 
tain, illustrates the absurdity of the position here attacked, by comparing it to • 
the "forcible entry of a robber into a merchant's house, who should take away 
his money, and tell him he did him no injury, for the money, or part of it, would 
be employed in purchasing the commodities he dealt in, upon which he would 
receive a profit." The encouragement afforded by the public expenditure is pre- 
cisely analogous. 
53 



418 ON CONSUMPTION. book hi.'* 

complex in the execution, must always be reducible by analysis to 
this plain statement. A product consumed must always be a pro- 
duct lost, be the consumer who he may; lost without return wher- 
ever no value or advantage is received in return; but, to the tax- 
payer, the advantage derived from the services of the public func- 
tionary, or from the consumption effected in the prosecution of 
public objects, is a positive return. 

If, then, public and private expenditure affect social wealth in 
the same manner, the principles of economy, by which it should be 
regulated, must be the same in both cases. There are not two kinds 
of economy, any more than two kinds of honesty, or of morality. If 
a government or an individual consume in such a way, as to o-ive 
birth to a product larger than that consumed, a successful effort of 
productive industry will be made. If no product result from the 
act of consumption, there is a loss of value, whether to the state or 
to the individual; yet, probably, that loss of value may have been 
productive of all the good anticipated. Military stores and sup- 
plies, and the time and labour of civil and military functionaries, 
engaged in the effectual defence of the state, are well bestowed, 
though consumed and annihilated; it is the same with them, as with 
the commodities and personal service, that have been consumed in 
a private establishment. The sole benefit resulting in the latter case 
IS, the satisfaction of a want; if the want had no existence, the 
expense or consumption is a positive mischief, incurred without an 
object. So likewise of the public consumption; consumption for 
the mere purpose of consumption, systematic profusion, the creation 
of an office, for the sole purpose of giving a salary, the destruction 
of an article, for the mere pleasure of paying for it, are acts of 
extravagance either in a government or an individual, in a small 
state or a large one, a republic or a monarchy. Nay, there is more 
criminality in public, than in private extravagance and profusion; 
inasmuch as the individual squanders only what belongs to him; 
but the government has nothing of its own to squander, being, in 
iact, a mere trustee of the public treasure.* 

What, then, are we to think of the principles laid down by those 
writers, who have laboured to draw an essential distinction between 
pubhc and private wealth; to show, that economy is the way to 
increase private fortune, but, on the contrary, that public wealth 
increases with the increase of public consumption: inferring thence 
this lalse and dangerous conclusion, that the rules of conduct in the 
management of private fortune and of public treasure, are not only 
dmerent, but in direct opposition? 

If such principles were to be found only in books, and had never 
crept into practice, one might suffer them without care or regret to 



nf i3 ^^I^T "^""^P^tion in a government, to pretend to a right over the property 
^L«t1r. ^^ 't!."' /•? ^'* f • '^ possessing such a right; and usurpation can never 
constitute right; although it may confer possession. Were it otherwise, a thief' 
7onlH ni°"T' ^n"'^''^ °' ^'^"'^' "^^^^"^'^ possession of another man's property 
Sonr?orh/^fl'lT" '?v,°^^^" restitution, when overpowered and takJn 
prisoner, for he might set up the plea of legitimate ownership. 



I 



CHAP. VI. ON CONSUMPTION. 419 

swell the monstrous heap of printed absurdity; but it must excite 
our compassion and indignation to hear them professed by men of 
eminent rank, talents, and intelligence; and still more to see them 
reduced into practice by the agents of public authority, who can 
enforce error and absurdity at the point of the bayonet or mouth of 
the cannon.* 

Madame de Maintenon mentions in a letter to the Cardinal de 
Noailles, that, when she one day urged Louis XIV. to be more 
liberal in charitable donations, he replied, that royalty dispenses 
charity by its pi'ofuse expeirditure; a truly alarming dogma, and 
one that shows the ruin of Fr-ance to have been reduced to princi- 
ple.! False principles are more fatal than even intentional miscon- 
duct; because they are followed up with erroneous notions of self- 
interest, and are long persevered in without remorse or reserve. If 
Louis XIV. had believed his extravagant ostentation to have been 
a mere gratification of his personal vanity, and his conquests the 
satisfaction of personal ambition alone, his good sense and proper 
feeling would probably, in a short time, have made it a matter of 
conscience to desist, or at any rate, he would have stopped short for 
his own sake; but he was firmly persuaded, that his prodigality was 
for the public good as well as his own; so that nothing could stop 
him, but misfortune and humiliation.^ 

* The reader will readily perceive, that this and many other passages, were 
written under the pressure of a military despotism, which had assumed the ab 
solute disposal of the national resources, and suffered no one to express a doubt 
of the justice and policy of its acts. 

I Fcnelon, Fauban, and a very few more, of the most distinguished talent, had 
a confused idea of the ruinous tendency of this system; but they failed in im- 
pressing the rest of the world with the same conviction, for want of just notions 
on the subject of the production and consumption of wealth. Thus Vauhun, in 
his Dixme royale says, ' the present misery of France is attributable, not to the ri- 
gour of the climate, the character of the inhabitants, or the barrenness of the 
soil: for the climate is most favourable, the people active, diligent, dexterous, and 
numerous: but to the frequency and long continuance of war, and the ignorance 
and neglect of economy.' Fenclon had expressed the same sentiments in seve- 
ral admirable passages of his Tdemaque, but they passed for mere declamation, 
as well they might; for he was not qualified to prove their truth and accuracy. 

X When Voltaire tells us, speaking of the superb edifices of Louis XIV., that 
they were by no means burthensome to the nation, but served to circulate money 
in the community, he gives a decisive proof of the utter ignorance of tlie most 
celebrated French writers of his day upon these matters. He looked no lurther 
than the money employed on the occasion; and, when the view is limited to that 
alone, the extreme of prodigality exhibits no appearance of loss; for money is, in 
fact, an item, neither of revenue, nor of annual consumption. But a little closer 
attention will convince us of the fallacy of this position, which would lead us to 
the absurd inference, that no consumption whatever has occurred within the 
year, whenever the amount of specie at the end of it is found to be nowise di- 
minished. The vigilance of the historian should have traced the 1G7 millions ot 
dollars expended on the chateau of Versailles alone, from the original produc- 
tion by the laborious efforts of the productive classes of the nation, to the hrst 
exchange into money, wherewith to pay the taxes, through the second exchange 
into building materials, painting, gilding, &c. to the ultimate consumption in 
that shape, for the personal gratification of the vanity of the monarch. Ihe 
money acted as a mere means of facilitating the transfers of value in the course 
of the transaction; and the winding up of the account will show, a destruction of 



420 ON CONSUMPTION. book hi. j 

So little were the true principles of political economy understood, ' 
even by men of the greatest science, so late as the 18th century' 
that Frederick II. of Prussia, with all his anxietv in search of truth' ■ 
his sagacity, and his merit, writes thus to D'Alembert, in justifica- 
tion of his wars: 'My numerous armies promote the circulation of 
money, and disburse impartially amongst the provinces the taxes 
paid by the people to the state.' Again I repeat, this is not the fact^ 
the taxes paid to the government by the subject are not refunded 
by its expenditure. Whether paid in money or in kind, they are 
converted into provisions and supplies, and in that shape consumed 
and destroyed by persons, that never can replace the value, because 
they produce no value whatever.* It was well for Prussia that 
Frederick II. did not square his conduct to his principles. The 
good he did to his people, by the economy of his internal adminis- 
tration, more than compensated the mischief of his wars. 

Since the consumption of nations on the governments which rep- 
resent them, occasions a loss of value, and consequently, of wealth 
it is only so far justifiable, as there results from it some national 
advantage, equivalent to the sacrifice of value. The whole skill of 
government, therefore, consists in the continual and judicious com- 
parison of the sacrifice about to be incurred, with the expected ben- 
efit to the community; for I have no hesitation in pronouncing 
every instance, where the benefit is not equivalent to the loss, to be 
an instance of folly, or of criminality, in the government. 

It IS yet more monstrous, then, to see how frequently govern- 
ments, not content with squandering the substance of the peoplet 

value to the amount of 167 millions of dollars, balanced by the production of a 
palace, in need of constant repair, and of the splendid promenade of the gardens 
Even land though imperishable, may be consumed in the shape of the value 
received for it. It has been asserted, that France lost nothing by the sale of her 
national domams after the revolution, because they were all sdcland transferred 
to l^rench subjects; but what became of the capital paid in the shape of purchase- 
money, when it left the pockets of the purchasers? Was it not consLed and 

throu^ph thVhnnf nf tf ^^ ''^'^""^^ "^'^'^'^ enterprise, two different values pass 
through the hands of the government or its agents: 1. The value paid in taxes bv 
he public at large: 2. The value received in°supplies and services from the par^ 
ties affording them. For the first of these no /eturn whatever is mad^- forTe 
second, an equivalent is paid in wages or purchase-money. Wherefore there 
It has no ground for saying that the government refunds with one hand what s 
received with the other; that the whole transaction is a mere circulation orvalue 
and causes no loss to the nation; for the government returns but one where it 
receives two; the loss of the other half falls upon the cLrSLi y^t We 
t^tre^SLntTthe'toT^^ '"' the aggregate of individual wealth, is SiminrsB 
to the extent of the total consumption of the government, mmws the product of 
the public establishment; as we shall presently see more in detail. ^ 
poLlatJon^f.lw''"''' '*" concluding chapter of Book 11. that, inasmuch as 
^Ss^ve mnUinK ^o^^^Hfrate with production, the obstruction of the pro- 
niicat on nf S^ ^^ "-.'''- '' ^ P^'^^^^tive check to the further multi- 

du.Trv.n5i T^" '•'^' ^."^ '^^^ *h^ ^^^^^ «f capital, the extinction of in- 
IcStinn.f .1'"'^"'''''°",°^ '^' '''''''' °f production amounts to positive 
maTrnthiswavT'"^ existence. A wicked or ig'norant admini^stration 

may in this way, be a far more destructive scourge, than war with all its atro- 



CHAP. VI. ON CONSUMPTION. 421 

in folly and absurdity, instead of aiming at any return of value, 
actually spend that substance in bringing down upon the nation 
calamities innumerable; practise exactions the most cruel and arbi- 
trai-y, to forward schemes the most extravagant and wicked; first 
rifle the pockets of the subject, to enable them afterwards to urge 
him to the further sacrifice of his blood. Nothing, but the obsti- 
nacy of human passion and weakness, could induce mc again and 
again to repeat these unpalatable truths, at the risk of incurring the 
charge of declamation. 

The consumption efi'ected by the government* forms so large a 
portion of the total national consumption, amounting sometimes to 
a sixth, a fifth, or even a fourth partt of the total consumption of the 

* By government, I mean, the ruling power in all its branches, and under 
whatever constitutional form; it would be wrong to limit the term to the execu- 
tive branch alone; the first enactment of a law is as much an act of authority, as 
its subsequent enforcement. 

t The consumption of a nation may undoubtedly exceed its aggregate annual 
revenue; but we can hardly suppose that of Great Britain to have done so; for 
she has evidently been advancing in opulence, up to the present time, whence it 
may be inferred, that her consumption, at the very utmost, only equals her reve- 
nue. Gentz, who will hardly be accused of underrating the financial resources 
of that country, estimated her total annual revenue at no more tban two hundred 
millions sterling; Dr. Beeke at two hundred and eighteen millions, inclusive of 
one hundred millions for the revenues of industry. Granting her to have made 
some further progress since those estimates were made, and that her total reve- 
nue in 1813, had advanced to two hundred and twenty-four millions, we axe told 
by Colquhoun, in his Wtaltli, Power, and Resources of the British Empire, that 
her public expenditure in that year amounted to one hundred and twelve mil- 
lions. By this statement it should seem, that her public expenditure then 
amounted to the half of the total expenditure of the nation! Moreover, the ex- 
penses of her central government do not include all her public charges; there 
are to be added, county and parish rates, poor rates, &c. &c. The business of 
government might be conducted, even in extensive empires, at a charge of not 
more than one per cent upon th^ggregate of individual revenue; but, to attain 
this degree of perfection, a vast improvement is still requisite in the department 
of practical policy.(l) 

(1) We copy from a Treatise on the Taxation of the British Empire, by R, 
Montgomery xMartin, published in London, in 1833, the following note:— "Lord 
Liverpool said, in 1822, that the annual income of Great Britain, after making 
allowances for the reduction of rents, and the diminution of the profits of trade 
since the war, may be stated to be from 250,000,000/. to 280,000,000/. sterling. 
Now if the population of Great Britain in 1833 be taken in round numbers at 
16 millions, and the average expenditure for each individual be so low as one 
shilling per day, or 18/. 5s. a-year, the annual income would be 452,000,000/. 
and double that sum if the average expenditure of each individual were taken at 
two shillings per day, which would not be an unreasonable cal(tilaiion; apply- 
• ing the same rule to Ireland, but giving the average expenditure of each indi- 
vidual so low as sixpence a-day, on a population of eight millions, the annual 
income of Ireland would be 73,000,000/. Thus the annual income of the United 
Kingdom in 1833, is upwards of 500,000,000/. sterling on the lowest computa- 
tiont" 

Estimating, on such authority, the annual income of Great Britain and Ire- 
land at 500 millions sterling, we perceive that this income, even after the pay- 
ment of the taxes, enormous as they have been, is much greater now than at any 
former period of her history; and there therefore can be no doubt that a continued 



422 ON CONSUMPTION. book hi. 

community, that the system acted upon by the government, must 
needs have a vast influence upon the advance or decline of the na- 
tional prosperity. Should an individual take it into his head, that 
the more he spends the more he gets, or that his profusion is a vir- 
tue; or should he yield to the powerful attractions of pleasure, or 
the suggestions of perhaps a reasonable resentment, he will in all 
probability be" ruined, and his example will operate upon a very 
small circle of his neighbours. But a mistake of this kind in the 
government, will entail misery upon millions, and possibly end in 
the national downfal or degradation. It is doubtless very desira- 
ble, that private persons should have a correct knowledge of their 
personal interests; but it must be infinitely more so, that govern- 
ments should possess that knowledge. Economy and order are 
virtues in a private station; but, in a public station, their influence 
upon national happiness is so immense, that one hardly knows how 
sufficiently to extol and honour them in the guides and rulers of 
national conduct. 

An individual is fully sensible of the value of the article he is 
consuming; it has probably cost him a world of labour, perseve- 
rance, and economy; he can easily balance the satisfaction he derives 
Irom its consumption against the loss it will involve. But a govern- 
ment is not so immediately interested in regularity and economy, 
nor does it so soon feel the ill consequences of the opposite quali- 
ties. Besides, private persons have a further motive than even self- 
interest; their feelings are concerned; their economy may be a 
benefit to the objects of their aflfection; whereas, the economy of a 
ruler accrues to the benefit of those he knows very little of; and 
perhaps he is but husbanding for an extravagant and rival successor 
Nor IS this evil remedied, by adopting the principle of hereditary 
rule. 1 he monarch has little of the feelings common to other men 
in this respect. He is taught to consick;- the fortune of his descen- 
dants as secure, if they have ever so little assurance of the succession 
Besides, the far greater part of the public consumption is not per- 
sonally directed by himself; contracts are not made by himself, but 
by his generals and ministers; the experience of the world hitherto 
all tends to show, that aristocratical republics are more economical' 
than either monarchies or democracies. * 

Neither are we to suppose, that the genius which prompts and 
excites great national undertakings, is incompatible with the spirit 
of public order and economy. The name of Charlemagne stands 
among the foremost in the records of renown; he achieved the con- 
quest of Italy, Hungary, and Austria; repulsed the Saracens; broke 
the baxon confederacy; and obtained at length the honours of the • 
purple. Yet Montesquieu has thought it not derogatory to say of 

augmentation of the nationa] capital must take place, even in defiance of many 
arfS "/• , "hepubhc expenditure, too, of the same Idngdom, is in course of 
fhTrtl . V°n , ^;i""gthe late war, as has been observed by our author, on 
triToT"-!^ °f CoVhoun, the public expenditure of the year 1813, amounted 
and in 1?4 "f ' ^^^^^^^ i" ^830 it was about 34 millions, in 1831, 33 millions, 
and in 1832 not so much by 100,000/. sterling. American Editor. 



CHAP. VI. ON CONSUMPTION. 423 

him, that^he father of a family might take a lesson of good house- 
keeping from the ordinances of Charlemagne. His expenditure was 
conducted with admirable system; he had his demesnes valued with 
care, skill, and minuteness. We find detailed in his capitularies, 
the pure and legitimate sources of his wealth. In a word, such was 
his regularity and thrift, that he gave orders for the eggs of his 
poultry yards, and the surplus vegetables of his garden to be 
brought to market."^ The celebrated Prince Eugene, who dis- 
played equal talent in negotiation and administration as in the 
field, advised the Emperor Charles VL, to take the advice of mer- 
chants and men of business, in matters of finance.t Leopold, when 
Grand Duke of Tuscany, towards the close of the 18th century, 
gave an eminent example of the resources, to be derived from a 
rigid adherence to the principles of private economy, in the ad- 
ministration of a state of very limited extent. In a few years, he 
made Tuscany one of the most flourishing states of Europe. 

The most successful financiers of France, Suger, Abbe de St. 
Dennis, the Cardinal D'Amboise, Sully, Colbert, and Necker, have 
all acted on the same principle. All found means of carrying into 
effect the grandest operations by adhering to the dictates of private 
economy. The Abbe de St. Dennis furnished the outfit of the second 
crusade; a scheme that required very large supplies, although one 1 
am far from approving. The Cardinal furnished Louis XII. with 
the means of making his conquest of the Milanese. Sully accumu- 
lated the resources, that afterwards huml)led the house of Austria. — 
Colbert supplied the splendid operations of Louis XIV. Necker 
provided the ways and means of the only successful war waged by 
France in the 18th century. J 

Those governments, on the contrary, that have been perpetually 
pressed with the want of money, have been obliged, like individuals, 
to have recourse to the most ruinous, and sometimes the most dis- 
graceful, expedients to extricate themselves. Charles the Bald put 
his titles and safe-conducts up to sale. Thus, too', Charles II. of 
England sold Dunkirk to the French king, and took a bribe of 
80,000/. from the Dutch, to delay the sailing of the English expe- 
dition to the East Indies, 1680, intended to protect their settlements 
in that quarter, which, in consequence, fell into the hands of the 
Dutchmen.§ Thus, too, have governments committed frequent acts 

* Esprit des Lois, liv. xxxi. c. 18. 

f Memoires du Prince Eugene par luimcme, p. 187. The authenticity of this 
work has been contested, as well as the Testament Politique of Richelieu. If 
not themselves the authors, they must at least have been men of equal capacity, 
of which there is still less probability. 

X He contrived to meet the charges of the American war, without the impo- 
sition of any additional taxes. He has been reproached, indeed, with having 
incurred heavy loans; but it is obvious, that, so long ae he found means to pay 
the interest upon them without fresh taxation, they were nowise burthensome 
upon the nation; and that the interest must have been defrayed by retrenchment 
of the expenditure. 

§ Raynal, Historic des Etab. dea Europ. dans les Indes, torn. ii. p. 36. 



424 ON CONSUMPTION. book m. 

of bankruptcy, sometimes in the shape of adulteration of their coin, 
and sometimes by open breach of their engagements. 

Louis XIV. towards the close of his reign, having utterly ex- 
hausted the resources of a noble territory, was reduced to the paltry 
shift of creating the most ridiculous offices, making his counsellors 
of state, one an inspector of fagots, another a licenser of barber-wig- 
makers, another, visiting inspector of fresh, or taster of salt, butter, 
and the like. Such paltry and mischievous expedients can never 
long defer the hour of calamities, that must sooner or later befal the 
extravagant and spendthrift governments. " When a man will not 
listen to reason," says Franklin, " she is sure to make herself felt." 

Fortunately, an economical administration soon repairs the mis- 
chiefs of one of an opposite character. Sound health cjm not be 
restored all at once; but there is a gradual and perceptible improve- 
ment; every day some cause of complaint disappears, and some new 
faculty comes again into play. Half the remaining resources of a 
nation, impoverished by an extravagant administration are neutral- 
ized by alarm and uncertainty; whereas, credit* doubles those of a 
nation, blessed with one of a frugal character. It would seem, that 
.there exists in the politic, to a stronger degree than even in the 
natural, body a principle of vitality and elasticity, which can not 
be extinguished without the most violent pressure. One can not 
look into the pages of history, without being struck with the rapidity, 
with which this principle has operated. It has no where been more 
strikingly exemplified, than in the frequent vicissitudes that our 
own France has experienced since the commencement of the revo- 
lution. Prussia has afforded another illustration in our time. The 
successor of Frederick the Great squandered the accumulations of 
that monarch, which were estimated at no less a sum than 42 millions 
of dollars, and left behind him, besides, a debt of 27 millions. In 
less than eight years, Frederick William III. had not only paid off 
his father's debts, but actually began a fresh accumulation; such is 
the power of economy, even in a country of limited extent and 
resources. 

* The expressions, credit is declining, credit is reviving, are common in the 
mouths of the generality, who are, for the most part, ignorant of the precise 
meaning of credit. It does not imply confidence in the government exclusively; 
for the bulk of the community have no concern with government, in respect to 
their private affairs. Neither is it exclusively applied to the mutual confidence 
of individuals; for a person in good repute and circumstances, does not forfeit 
them all at once; and, even in times of general distress, the forfeiture of indi- 
vidual character is by no means so universal, as to justify the assertion, that 
credit is at an end. It would rather seem to imply, confidence in future events. 
The temporary dread of taxation, arbitrary exaction, or violence, will deter num- 
bers from exposing their persons or their property; undertakings, however pro- 
mising and well-planned, become too hazardous; new ones are altogether dis- 
couraged, old ones feel a diminution of profit; merchants contract their opera- 
tioHs; and consumption in general falls off, in consequence of the decline and 
the uncertainty of individual revenue. There can be no confidence in future 
events, either under an enterprising, ambitious, or unjust government, or under 
one, that is wanting in strength, decision, or method. Credit, like crystalliza- 
tion, can only take place in a state of quiescence. 



CHAP. VI. ON CONSUMPTION. 425 

Section II. 
Of the principal Objects of National Expenditure. 

In the preceding section, it has been endeavoured to show, that, 
since all consumption by the public is in itself a sacrifice of value, 
an evil balanced only by such benefit, as may result to the commu- 
nity from the satisfaction of any of its wants, a good administration 
will never spend for the mere sake of spending, but take care to 
ascertain that the public benefit, resulting, in each instance, from 
the satisfaction of a public want, shall exceed the sacrifice incurred 
in its acquirement. 

A comprehensive view of the principal public wants of a civilized 
community, can alone qualify us to estimate with tolerable accuracy 
the sacrifice it is worth while for the community to make for their 
gratification.* 

The public consumes little else, but what have been denominated 
immaterial products, that is to say, products destroyed as soon as 
created; in other words, the services or agency, either of human 
beings, or of other objects, animate or inanimate.! 

It consumes the personal service of all its functionaries, civil, 
judicial, military, or ecclesiastical. It consumes the agency of land 
and capital. The navigation of rivers and seas, utility of roads 
and ground open to the public, are so much agency derived by the 
public from land, of which either the absolute property, or the 
beneficial enjoyment, is vested in the public. Where capital has 
been vested in the land, in the shape of buildings, bridges, artificial 
harbours, causeways, dikes, canals, &c. the public then consumes 
the agency, or the rent of the land,jo/w.s the agency, <ir the interest, 
of the capital so vested. 

Sometimes the public maintains establishments of productive 
industry; for instance, the porcelain manufacture of Sevres, the 
Gobelin tapestry, the salt works of Lorraine and of the Jura, &c., 
in France. When concerns of this kind bring more than their 
expenditure, which is but rarely the case, they furnish part of the 
national revenue, and must by no means be classed among the items 
of national charge. 

Of the Charge of Civil and Judicial Administration. 

The charge of civil and judicial administration is made 'yp, 
partly of the specific allowances of magistrates and other oflicers, 

* A mere sketch is all that can be expected in a work like the present: a com- 
plete treatise on government would be equally appropriate with a survey of the 
arts, when it became incidentally necessary to touch upon the processes of 
manufacture. Yet, either would be a valuable addition to literary wealth. 

I This rule must be taken with some qualification. The habitual largesses of 
corn, distributed by the emperors to the people of ancient Rome, were material 
objects of public consumption. So likewise the provisions of all kinds con- 
sumed in hospitals and prisons, and the fireworks used on occasions of public 
display or rejoicing, for the amusement of the people at large. 
54 



426 ON CONSUMPTION. book hi. 

and partly of such degree of pomp and parade, as may be deemed 
necessary in the execution of their duties. Even if the burthen 
of that pomp and parade be thrown wholly or partially upon the 
public functionary, it must ultimately fall upon the shoulders of the 
public, for the salary of the functionary must be raised, in propor- 
tion to the appearance he is expected to make. This observation ap- 
plies to every description of functionary, from the prince to the con- 
stable inclusive; consequently, a nation, which reverences its prince 
only when surrounded with the externals of greatness, with guards, 
horse and foot, laced liveries, and such costly trappings of royalty 
must pay dearly for its taste. If, on the contrary, it can be content, 
to respect simplicity rather than pageantry, and obey the laws, though 
unaided by the attributes of pomp and ceremony, it will save in pro- 
portion. This is what made the charges of government so light in 
many of the Swiss cantons, before the revolution, and in the North 
American colonies before their emancipation. It is well known, 
that those colonies, though under the dominion of England, had se- 
parate governments, of which they respectively defrayed the charge; 
yet the whole annual expenditure all together amounted to no more 
than 64,700/. sterling. ' An ever memorable example,' observes 
Smith, ' at how small an expense three millions of people may not 
only be governed, but well governed.'* 

* It should be recollected, however, that they were at no charge of defence 
from external attack, except in respect to the savage tribes of the interior. 

From the official account of the receipts and disbursements of the United 
States, in the year 1806, presented by Mr. Gallatin, then Secretary of the Trea- 
sury, It appears that the total expenditure fell short of twelve millions of dollars, 
of which eight millions went to pay the interest of the public debt; leaving a 
sum of four millions only for the charge of government, that is to say, the civil, 
judicial, military, and other public functions of a population of twelve millions: 
which is wholly defrayed by taxes on imports, (1) 

(1) At the period to which our author here refers, namely, the year 1806, the 
actual expenditure by the government of the United States, for that year, accord- 
ing to the report of the Secretary of theTreasury, was 15,070,093 dollars 97 cents, 
and of this amount, according to the same authority, 8,989,884 dollars 61 cents, 
was on account of the extinguishment of the principal and interest of the public 
debt. _ The population of the United States, for the same year, was only about 
6 millions; for, according to the official enumerations, the population, in the 
year 1800, was 5,305,925, and in the year 1810, was 7,239,814. Now the 
charges 6f the government, exclusive of the payment of the public debt, it will 
be seen, amounted then to 6,080,209 dollars 36 cents, or an expenditure equal to 
more than treble the amount given by our author. 

'The whole public expenditure of the people of the United States necessarily 
eifibraces the local disbursements of the different states, as well as the expendi- 
ture of the general government. Of the former we have, as yet, no means of 
presenting our readers with any accurate or official account, and we will not 
venture to indulge in any loose estimates. Of the latter, however, we are enabled 
to furnish a tabular view, extracted from the letter of the Secretary of the Treasury 
to the Chairman of the Committee of the House of Representatives on Retrench- 
ment, April 9, 1830, and from the subsequent annual Treasury Reports, which 
will exhibit an authentic and accurate view of the receipts and expenditures of 
the Federal Government, from the 4th of March, 1789, the period of its com- 
mencement, to the 31st of December, 1832, the last date to which the accounts 
have been all made up. 



''^ 



CHAP. VI. 



ON CONSUMPTION. 



427 



Causes entirely of a political nature as well as the form of govern- 
ment which they help to determine, have an influence in apportion- 
ing the salaries of public officers, civil and judicial, the charge of 
public display, and those likewise of public institutions and establish- 



We also subjoin the last official revision of the population returns of the several 
states and territories, according to the five enumerations of the years 1790, 1800, 
1810, 1820, and 1830. 

RECEIPTS from March 4, 1789, to December 
31, 1833. 



1 


'ear 


s. 1 


Customs. 


Total. 




From 






March 4, 1 


7S9, to 






Dec. 


31, 


1791 


§4,390,473 09 


$10,210,025 75 


<« 


ii 


1792 


3,443,070 85 


8,740,766 77 


(( 


n 


1793 


4,255,606 5(i 


5,720,624 28 


t( 


(i 


1794 


4,801,065 28 


10,041,101 65 


(( 


li 


1795 


5,588,461 26 


9,419,802 79 


it 


a 


1796 


6,567,987 94 


8,740,329 65 


n 


n 


1797 


7,549,649 65 


8,758,916 40 


li 


a 


1798 


7,106,061 93 


8,209,070 07 


(( 


n 


1799 


6,610,449 31 


12,621,459 84 


(( 


a 


1800 


9,080,932 73 


12,451,184 14 


t( 


n 


1801 


10,750,778 93 


12,945,455 95 


(( 


a 


1802 


12,438,235 74 


15,001,391 31 


it 


(1 


1803 


10,479,417 61 


11,064,097 63 


n 


n 


1804 


11,098,565 33 


11,835,840 02 


u 


n 


1805 


12,936,487 04 


13,689,508 14 


(( 


it 


1806 


14,667,698 17 


15,608,823 78 


a 


«( 


1807 


15,845,521 61 


16,398,019 26 


t( 


(1 


1808 


16,363,550 58 


17,062,544 09 


(( 


t( 


1809 


7,296,020 58 


7,773,473 12 


«( 


(1 


1810 


8,583,309 31 


12,144,206 53 


>( 


u 


1811 


13,313,222 73 


14,431,838 14 


(( 


(( 


1812 


8,958,777 53 


22,639,032 76 


(1 


l( 


1813 


13,224,623 25 


40,524,844 95 


ii 


^i 


1814 


5,998,772 08 


34,559,536 95 


li 


n 


1815 


7,282,942 22 


50,961,237 60 


a 


a 


1816 


36,306,874 88 


57,171,421 82 


n 


" 


1817 


26,283,348 49 


33,833,592 33 


n 


(' 


1818 


17,176,385 00 


21,593,936 66 


ti 


f 


1819 


20,283,608 76 


24,605,665 37 


" 


'• 


1820 


15,005,612 15 


20,881,493 68 


(( 


(( 


1821 


13,004,447 15 


19,573,703 72 


" 


n 


1822 


17,589,761 94 


20,232,427 94 


t( 


it 


1823 


19,088,433 44 


20,540,666 26 


(( 


n 


1824 


17,878,325 71 


24,381,212 79 


n 


" 


1825 


20,098,713 45 


26,840,858 02 


n 


it 


1826 


23,341.331 77 


25,260,434 21 


n 


(( 


1827 


19.712,283 29 


22,966,363 96 


n 


i( 


1828 


23,205,523 64 


24,763,629 23 


n 


(( 


1829 


22,681,965 91 


24,767,122 22 


a 


(( 


1830 


21,922,391 39 


24,844,116 51 


ii 


(( 


1831 


24,224,441 97 


28,526,820 82 


" 


(( 


1832 


28,465,237 21 


31,865,561 16 


(( 


n 


1833 


29,032,508 91 


33,948,426 25 



§623,941,576 171^878,150,589 52 



428 



ON CONSUMPTION. 



BOOK III. 



ments. Thus, in a despotic government, where the subject holds 
his property at the will of the sovereign, who fixes himself the 
charge of his household, that is to say, the amount of the public 
money which he chooses to spend on his personal necessities and 
pleasures, and the keeping up of the royal establishment, that charge 
will probably be fixed at a higher rate, than where it is arranged and 



EXPENDITURES from March 4, 1789, to De- 






cember 31, 1833 


. 


Years. 


Public Debt. 


Total. 




From 






March 4, 1789, to 




^ 


Dec 


31, 1791 


^5,287,949 50 


^7,207,539 08 


(( 


" 1792 


7,263,665 99 


9,141,569 67 


(( 


" 1793 


5,819,505 29 


7,529,575 55 


(( 


" 1794 


5,801,578 09 


9,302,124 74 


(i 


" 1795 


6,084,411 61 


10,435,069 65 


(( 


" 1796 


5,835,846 44 


8,367,776 84 


(( 


" 1797 


5,792,421 82 


8,626,012 78 


(( 


" 1798 


3,990,294 14 


8,613,517 68 


a 


" 1799 


4,596,876 78 


11,077,043 50 


(( 


" 1800 


4,578,369 95 


11,989,739 92 


(( 


" 1801 


7,291,707 04 


12,273,376 94 


(1 


" 1802 


9,539,004 76 


13,276,084 67 


(( 


" 1803 


7,256,159 43 


11,258,983 67 


(( 


" 1804 


8,171,787 45 


12,624,646 36 


(( 


" 1805 


7,369,889 79 


13,727,124 41 


i( 


" 1806 


8,989,884 61 


15,070,093 97 


(( 


" 1807 


6,307,720 10 


11,292,292 99 


(( 


" 1808 


10,260,245 35 


16,764,584 20 


a 


" 1809 


6,452,554 16 


13,867,226 30 


n 


« 1810 


8,008,904 46 


13,319,986 74 


u 


« 1811 


8,009,204 05 


13,601,808 91 


(( 


" 1812 


4,449,622 45 


22,279,121 15 


> (' 


" 1813 


11,108,128 44 


39,190,520 36 


(( 


" 1814 


7,900,543 94 


38,028,230 32 


(( 


" 1815 


12,628,922 35 


39,582,493 35 


(( 


" 1816 


24,871,062 93 


48,244,495 51 


(( 


" 1817 


25,423,036 12 


40,877,646 04 


(( 


" 1818 


21,396,201 62 


35,104,875 40 


(t 


" 1819 


7,703,926 29 


24,004,199 73 


(( 


" 1820 


8,628,494 28 


21,763,024 85 


(C 


" 1821 


8,367,093 62 


19,090,572 69 ii 


(( 


«' 1822 


7,848,949 12 


17,676,592 63 M 


(( 


« 1823 


5,530,016 41 


15,314,171 00 H 


(i 


" 1824 


16,568,393 76 


31,898,538 47 J 


(( 


" 1825 


12,095,344 78 


23,585,804 72 1 


(( 


" 1826 


11,041,032 19 


24,103,398 46 i 


(( 


" 1827 


10,003,668 39 


22,656,765 04 " 


t( 


« 1828 


12,163,438 07 


25,459,479 52 


(( 


" 1829 


12,383,800 77 


25,071,017 59 


i( 


" 1830 


11,355,748 22 


24,585,281 55 


(( 


« 1831 


16,174,378 22 


30,038,446 12 


(( ' 


" 1832 


17,840,309 29 


34,356,698 06 


(( 


" 1833 


1,543,543 38 


24,257,298 49 






^409,633,680 45 


$866,534,848 56 



CHAP. VI. 



ON CONSUMPTION. 



429 



contested between the representatives of the prince and of the tax- 
payers respectively. 

The salaries of inferior public Officers in like manner depend, 
partly upon their individual importance, and partly upon the gene- 
ral plan of government.. Their services are dear or cheap to the pub- 
lic, not merely in proportion to what they actually cost, but likewise 
in proportion as they are well or ill executed. A duty ill perform- 
ed is dearly bought, however little be paid for it; it is dear too, if it 
be superfluous, or unnecessary; resembling In this respect an article 
of furniture, that, if it do not answer its purpose, or be not wanted, 
is merely useless lumber. Of this description, under the old regime 
of France, were the officers of high-admiral, high-steward of the 
household, the king's cup-bearer, the master of his hounds, and a 
variety of others, which added nothing even to the splendour of 
royalty, and were merely so many means of dispensing personal 
favour and emolument. 

For the same reason, whenever the officers of government are 



POPULATION OF THE UNITED STATES, 
According to Five Enumerations; from the Official Revision. 



States. 



Maine, . . . 
New Hampshire, 
Vermont, . . 
Massachusetts, 
Rhode Island, . 
Connecticut, . 
New York, 
New Jersey, . 
Pennsylvania, . 
Delaware, . . 
Maryland, . . 
Virginia, . . 
North Carolina, 
South Carolina, 
Georgia, 
Alabama, . 
Mississippi, 
Louisiana, . 
Tennessee, . 
Kentucky, . 
Ohio, . . 
Indiana, . . 
Illinois, . . 
Missouri, . 
District of Columbia 
Florida Territory, . 
Michigan Territory, 
Arkansas Territory, 



1790. 



1800. 



Total 



96,540 
141,899 

85,416 
378,717 

69,110 
238,141 
J40,120 
184,139 
434,373 

59,096 
319,728 
748,308 
393,751 
249,073 

82,548 



35,791 
73,077 



151,719 
183,762 
154,465 
423,245 

69,122 
251,002 
586,756 
211,949 
602,365 

64,273 
341,548 
880,200 
478,103 
345,591 
162,101 

8,850 

105,602 

220,955 

45,365 

4,875 



14,093 



1810. 

228,705 

214,360 

217,713 

472,040 

77,031 

262,042 

959,949 

249,555 

810,091 

72,674 

380,546 

974,622 

555,500 

415,115 

252,433 

20,845 

40,352 

76,556 

261,727 

406,511 

230,760 

24,520 

12,282 

20,845 

24,023 



1820. 



1830. 



298,335 

244,161 

235,764 

523,287 

83,059 

275,202 

,372,812 

277,575 

,049,458 

72,749 

407,350 

,065,379 

638,829 

502,741 

340,987 

127,901 

75,448 

153,407 

422,813 

564,317 

581,434 

147,178 

55,211 

66,586 

33,039 



4,762 



3,929,827 5,305,925 7,239,814 9,638,131 12,866,020 

American Editor. 



8,896 
14,273 



399,955 
269,328 
280,652 
610,408 
97,199 
297,665 

1,918,608 
320,823 

1,348,233 

76,748 

447,040 

1,211,405 

737,987 

581,185 

516,823 

309,527 

136,621 

215,739 

681,904 

687,917 

937,903 

343,031 

157,455 

140,445 

39,834 

34,730 

31,639 

30,388 



430 ON CONSUMPTION. bookIIi 

needlessly multiplied, the people are saddled with charges, which ' 
are not necessary to the maintenance of public order. It is only 
giving an unnecessary form to fhat benefit, or product, which is not 
at all the better of it, if indeed il be not worse.* A bad government 
that can not support its violence, injustice, and exaction, without a 
multitude of mercenaries, satellites, and spies, and gaols innumera- 
ble, makes its subjects pay for its prisons, spies, and^ soldiers, which 
nowise contribute to the public happiness. 

On the other hand, a public duty may be cheap, although very 
liberally paid. A low salary is wholly thrown away uponln inca- 
pable and mefficient officer; his ignorance will probably cost the 
public ten times the amount of his salary; but the knowledge and 
activity of a man of ability are fully equivalent to the pay he receives- 
the losses he saves to the public, and the benefits derived from his 
exertions, greatly outweigh his personal emolument, even if settled 
on the most liberal scale. 

There is real economy in procuring the best of every thing, even 
at a larger price. Merit can seldom be engaged at a low rSe be- 
cause Jt IS applicable to more occupations than one. The talent, that 
makes an able mmister, would, in another profession, make a good 
advocate, physician, farmer, or merchant; and merit will find both 
employment and emolument in all these departments. If the pub- 
lic service offbr no adequate reward for its exertion, it will choose 
some other more promising occupation. 

Integrity is like talent; it can not be had without paying for if 
which 1^ not at a 1 wonderful; for the honest man can not resort to 
those discreditable shifts and contrivances, which dishonesty looks 
to as a supplemental resource. ^ 

The povyer, which commonly accompanies the exercise of public 
functions, IS a kind of salary, that often far exceeds the pecu^niarv 
emolument attached to them. It is true, that in a well ordered 
stae, where law is supreme, and little is left to the arbitrarv con- 
nd loveTf ' ''T " '''''^ opportunity of indulging the cVr i e 
and love of domination implanted in the human b?ea?t. Yet the 
discretion, which the law must inevitably vest in those who are to 
enforce it and particularly in the ministerial department, together 
w th the honour commonly attendant on the higher offi'ces ofthe 
state, have a real value, which makes them eagerly souo-ht for 
even in countries where they are by no means lucrative. " ' 

to aM.e'«ll nf'''-'''"r^ ^°"^^ ^'""^^^^y "^ake it advisable 
to abiidge all pecuniary allowance, wherever there are other suf- 
ficient attractions to excite a competition for office, and to confer 
It on none but the wealthy, were there not a risk of loirbv 
the incapacity of the officer, more than would be gained by the 

fr. (5,580 dolS.ffL ^ ^- ^°^P^"'^1 government, though it cost 30,000 

the sovereign -^ ""* '"'"'"^ ^^^'"'^ the caprice and arbitrary will of 



CHAP. VI. ON CONSUMPTION. 431 

abridgment of his salary. This, as Plato well observes in his 
Republic, would be like entrusting the helm to the richest man 
on board. Besides, there is some danger, that a man, who gives 
his services for nothing, will make his authority a matter of gain, 
however rich he may be. The wealth of a public functionary is 
no security against his venality: for ample fortune is commonly 
accompanied with desires as ample, and probably even moi'e am- 
ple, especially if he have to keep up an appearance, both as a 
man of wealth and a magistrate. Moreover, supposing what is not 
altogether impossible, namely, that one can meet with wealth united 
with probity, and with, besides, the activity requisite to the due 
performance of public duty, is it wise to run the risk of adding the 
preponderance of authority to that of wealth, which is already but 
too manifest? With what grace could his employers call to account 
an agent, who could assume the merit of generosity, both with the 
people and with the government? There are, however, some ways, 
in which the gratuitous services of the rich may be employed with 
advantage: particularly in those departments, that confer more honour 
than power: as in the administration of institutions of public char- 
ity, or of public correction or punishnlent. 

In France under the old regime, the government, when harassed 
with the want of money, was in the habit of putting up its offices 
to sale. This is the very worst of all expedients; it introduces all 
the mischiefs of gratuitous service; for the emolument is then no 
more, than the interest of the capital expended in the purchase of 
the office; and has the additional evil of costing to the state as much 
as if the service were not gratuitously performed; for the public 
remains charged with the interest of a capital, that has been con- 
sumed and lost. 

It has been sometimes the practice to consign certain civil func- 
tions, such as the registry of births, marriages, and deaths, to the 
ecclesiastical body, whose emoluments, arising from their clerical 
duties, may be supposed to enable them to execute these without 
pay. But there is always danger in confiding the execution of 
civil duties to a class of men, that pretend to a commission from 
a still higher than a national authority.* 

In spite of every precaution, tlie public or the monarch will never 
be served so well or so cheaply as individuals. Inferior public 

* Several times during the last century the Molinist priesthood refused to 
execute their clerical duties in favour of the Jansenists, in sj»ite of all the govern- 
ment could do; on the pretence, that it was better to obey the divine command 
as conveyed by the voice of the Pope, than that of any human authority. (a) 

(a) This inconvenience can arise only in countries, where there is an exclusive 
national church, subjected, in matters of doctrine and discipline, to an indepen- 
dent or external superior: as in countries embracing the faith of Rome. But 
there is another inconvenience, that has been much dwelt upon by an eminent 
divine of the Scottish church; viz. the inconvenience of directing the attention 
of the priesthood from its clerical to civil functions, and, by a confusion of such 
differeut duties, abridging the benefit of division of labour. T. 



432 ON CONSUMPTION. 



BOOK III. 



agents can not be so narrowly watched by their superiors, as pri- 
vate ones; nor have the superiors themselves an equal interest in 
vigilant superintendence. Besides, it is easy enough for under- 
lings to impose on a superior, who has many to look after, is per- 
haps placed at a distance, and can give but little attention to each 
individually; and whose vanity makes him more alive to the offi- 
cious zeal of his inferior, than to the real service and utility, that 
the public good requires. As to the monarch and the nation who 
are the parties most interested in good public administration, 
because It consolidates the power of the one and enlarges the hap- 
piness of the other, it is next to impossible for them to exert a per- 
petual and effectual control. In most cases, this duty must of 
necessity devolve on agents, who will deceive them when it is their 
interest to do so, as is proved by abundance of examples "Pub- 
lic services,'' says Smith, "are never better performed than when 
their reward comes only in consequence of their being performed, 
and IS proportioned to the diligence employed in performing them." 
Accordingly he recommends, that the salaries of judges should be 
paid at the final determination of each suit, and the share of each 
judge proportioned to their respective trouble in the progress of it 
Ihis would be some encouragement to the diligence of each parti- 
cular judge as well as to that of the court, in bringing litigation to 
r Ti k ^'^ would be some difficulty in applying this method 
to all the branches of the public service; and it would probablv 
introduce as great abuses in the opposite way; but it would at least 
be productive of one good; viz. preventing the needless multipli- 
cation of offices. It would likewise give the public the same 
advantage of competition, as enjoyed by individuals, in respect to 
the services they call for. ^ 

Not only are the time and labour of public men in general better 
paid for than those of other persons, besides being often wasted bv 
their own mismanagement, without the possibility of an efficient 
check; but there is often a further enormous waste, occasioned bv 
compliance with the customs of the country, and court etiquette. It 
would be curious to calculate the time wasted in the toilet, or ti 
estimate, if possible, the many dearly-paid hours lost, in the course 
Dt the last century, on the road between Paris and Versailles 

Thus, in the governments of Asia, there is an immense waste of 
the time of the superior public servants in tedious and ceremo- 
nious observances. The monarch, after allowing for the hours of 
customary parade, and those of personal pleasure, has little time 
left to look after his own affairs, which, consequently, soon go 
to rum Frederick II of Prussia, by adopting; a contrary line of 
conduct, and by the judicious distribution and apportionment of his 
time, contrived to get through a great deal of business himself By 
this means, he really lived longer than older men than himself, and 
succeeded m raising his kingdom to a first rate power. His other 
great qualities, doubtless, contributed to his success; but they would 
not have been sufficient, without a methodical arrangement of his 



CHAP. VI. 



ON CONSUMPTION. 433 



Of Charges, Military and Naval. 

When a nation has made any considerable progress in commerce, 
manufacture, and the arts, and its products have, consequently, 
become various and abundant, it would be an immense mconye- 
nience, if every citizen were liable to be dragged from a productive 
emplovment, which has become necessary to society, for the pur- 
poses of national defence. The cultivator of the soil works no 
lon<rer for the sustenance of himself and family only but also tor 
thaf of many other families, who are either owners of the soil, and 
share in its produce, or traders and manufacturers, that supply him 
with articles he cannot do without. He must, therefore, cultivate a 
lar-er extent of surface, must vary his tillage, keep a arger stock of 
cattle and follow a complex mode of cultivation that will iully 
occupy his leisure between seed-time and harvest.* 

Still less can the trader and manufacturer afford thus to sacrifice 
time and talents, whereof the constant occupation, except during the 
intervals of rest, is necessary to the production, irom which they are 
to derive their subsistence. , , . ji 

The owners of land let out to farm may, undoubtedly, serve as 
soldiers without pay; as, indeed, the nobility and gentry do, in some 
measure, in monarchical states; but they are, for the most part, so 
much accustomed to the sweets of social existence, so little goaded 
bv necessity towards the conception and achievement of great enter- 
prises, and feel so little of the enthusiasm of emulation and e5^n/ c^e 
corm that they commonly prefer a pecuniary sacrifice to that oi 
comfort, and possibly of life. And these motives operate equally 
with the owners of capital. ■ . * 

All these reasons have led individuals, in most modern states, to 
consent to a taxation, that may enable the monarch or the republic 
to defend the country against external violence with a hired and pro- 
fessfotl solk^?^^^ wL are, however, too apt to become the tools of 
their leader's ambition or tyranny. 

When war has become a trade, it benefits, like all other trades, 
from the division of labour. Every branch of human science is 
pressed into its service. Distinction or excellence, whether in the 
capacity of general, engineer, subaltern, or even private soldier, can 
no be obtained wi bout long training, perh.ps, and constant prac- 
tice The nation, which should act upon a different principle would 
ie under the disadvantage of opposing the imperfection, to Uie per- 
fLctbn, of art. Thus, excepting the cases, in which the enthusiasm 
ofTwhole nation has been Used to action, the advantage has uni- 

* The Greek<. until the second Persian war, and the Romans, unt'l jhe siege 
of vTii regularly rde their ,n^ in that mlerva . NaUons of 

ot Yen, reguiaiiy w nav little attention to the arts, and none to agriculture, 

Yv'Z ?armsand A ab ,S es circumscribed in time, a.id can prosecute their 
like thelartarsand Araos, are le nromises booty, and furnishes pasturage. 

and of the Moors and the Turks. 
55 



BOOK III. 



434 ON CONSUMPTION. 

Th^THrr," 1^1.*^^'^^"?^'^^''^^^^^^^ professional soldiery. 

The Turks although professing the utmost contempt for the arts of 
their Ctotian neighbours, are compelled by the dread of extermi- 
ifZlur ^7 scholars in the art of war. The European powers 
were all forced to adopt the military tactics of the Prussians; and,! 
when the violent agitation of the French revolution pressed 'evTry I 

n.rnfV '"'"'" '° 't ''^ '^ '^'^ ''^''^' °f the republic, the ene- 
mies of France were obliged to follow the example. ' 

Ihis extensive application of science, and adaptation of fresh 

wa'r far'lvT°'' '""? ' '''°"f "' ^"^ "^^^^^^^^ P"rP°«««' have made 
nowfdZ . P'"T "°^ ^^'^ ^" ^°™^^ t™^« ^t i« necessary 
now-a-days, to provide an army beforehand, with supplies of arms, 
ammunition magazines of provision, ordnance, &c., equal to the con- ' 
sumption of one campaign at the least. The invention of gunpowder 
lT''T t ^' T °^ '^''P°"^ ^^°^^ ^°^^Pl«^ ^^^ expensive and 
JZL T '" ^ '''"f °^ ^^P^^^^"y the field and battering 
vari/t'v J^^:^^°7^';he wonderful improvement of naval tactics, the 
IfZJ ^f«el«f every class and construction, all requiring the 
utmost exertion of human genius and industry; the yards, docks, l 
7.rZ7j ^'°r'^°"^^^' &«• have entailed upon nations addicted to I 

tTlitv Tn 1 nhl 7T.'" '^P'"'^ ^" P^^^^' ^^ i^ times of actual hos- f 
tility, and obliged them not only to expend a great portion of their ' 
income, but to vest a great amount of capital likewise in military 
establishments. In addition to which, it is to be observed, t^ t he 
modern colonial system, that is to say, the svstem of retaining he 
sovereignty of towns and provinces in distant parts of the world I 
has made the European states open to attack and^ggression Tthe I 
most remote quarters of the globe, and the whole world the theatre 
W uu'u''^^'' ""^ °^'^^ '^^di"g P^^ers are the belligerents * 
Wealth has, consequently, becom^ as indispensable fsvaburto 
the prosecution of modern warfare; and a poor nation can no Wer 
withstand a rich one. Wherefore, since wealth can be acquired 
only by industry and frugality, it may safely be predicted that 
every na ion, whose agriculture, manufacture, and commerce shal 
be ruined by bad government, or exorbitant taxation, Zst nfallTbly 
fall under the yoke ol its more provident neighbours. We mav 
further conclude, that henceforward national strength will accom^ 
pany national science and civilization; for none but civil zed natos 

to'areheTd thrf'f"'^^ ^^^"'^"^ ^^''^^^^^ - ^^at there TslreZn 
to apprehend the future recurrence of those sudden overthrows of 

civilized empires by the influx of barbarous tribes, of Xch hTtorv 
afiords many examples. ' wmtn nisiory 

War costs a nation more than its actual expense; it costs besides 
all that would have been gained, but for its oLurr^nce. ^ 

When Louis XIV. in 1672, resolved in a fit of passion, to chas- 

BTL'i^X?nrheTl:sltarwuL\T"^''"'^^^^ ^"^° '^^ ^^^^ ^y Great 
continent of lurope And ^hlotCT' '''' i'' 'T' ^' ""^"^ ^' °°^ «" the 
gravated by the dfstnct in an e^fal at'"^'' '' '''''''' ""^^ '' ''^''^ ^^ -S" 



CHAP. VI. ON CONSUMPTION. 435 

tise the Dutch for the insolence of their newspaper writers, Boreel, 
the Dutch ambassador, laid before him a memorial showing that 
France through the medium of Holland, sold produce annually to 
foreign nations, to the amount of sixty millions/r. at the then scale 
of price; which will fall little short of 120 millions (22,000,000 of 
dollars) at the present. But the court treated his representations as 
the mere empty bravado of an ambassador. 

To conclude: the charges of war would be very incorrectly esti- 
mated, were we to take no account of the havoc and destruction it 
occasions; for that one at least of the belligerents, whose territory 
happens to be the scene of operations, must be exposed to its 
ravages. The more industrious the nation, the more does it suffer 
from warfare. When it penetrates into a district abounding in agri- 
cultural, manufacturing, and commercial establishments, it is like a 
fire in a place full of combustibles; its fury is aggravated, and the 
devastation prodigious. Smith calls the soldier an unproductive 
labourer; would to God he were nothing more, and not a destruc- 
tive one into the bargain ! he not only adds no product of his own(a) 
to the general stock of wealth, in return for the necessary subsist- 
ence he consumes, but is often set to work to destroy the fruits of 
other people's labour and toil, without doing himself any benefit. 

The tardy, but irresistible expansion of intelligence will probably 
operate a still further change in external political relations, and with 
it a prodigious saving of expenditure for the purposes of war. 
Nations will be taught to know that they have really no interest in 
fighting one another; that they are sure to suffer all the calamities 
incident to defeat, while the advantages of success are altogether 
illusory. According to the international policy of the present day, 
the vanquished are sure to be taxed by the victor, and the victor by 
domestic authority: for the interest of loans must be raised by tax- 
ation. There is no instance on record, of any diminution of 
national expenditure being effected by the most successful issue of 
hostilities. And, what is the glory it can confer^ more than a mere 
toy of the most extravagant price, that can never even amuse 
rational minds for any length of time? Dominion by land or sea 
will appear equally destitute of attraction, when it comes to be 
generally understood, that all its advantages rest with the rulers, and 
that the subjects at large derive no benefit whatever. To private 
individuals, the greatest possible benefit is entire freedom of inter- 
course, which can hardly be enjoyed except in peace. Nature 
prompts nations to mutual amity; and, if their governments take 
upon themselves to interrupt it, and engage them in hostility, they 
are equally inimical to their own people, and to those they war 
against. If their subjects are weak enough to second the ruinous 
vanity or ambition of their rulers in this propensity, I know not 

(a) This is too generally expressed. Where security from external attack is 
only to be had by means of a professional soldiery, the soldier is a productive 
agent — productive of the immaterial product, security from external attack, than 
which, under certain circumstances, none can be more valuable. T. 



436 ON CONSUMPTION. book hi. 

how to distinguish such egregious folly and absurdity, from that of 
the brutes that are trained to fight and tear each other to pieces, for 
the mere amusement of their savage masters. 

But human intelligence will not stand still; the same impulse that 
has hitherto borne it onwards, will continue to advance it yet further.* 
The very circumstance of the vast increase of expense attending 
national warfare has made it impossible for governments henceforth 
to engage in it, without the public assent, express or implied; and 
that assent will be obtained with the more difficulty, in proportion as 
the public shall become more generally acquainted with their real 
interest. The national military establishment will be reduced to 
what is barely sufficient to repel external attack; for which purpose 
little more is necessary, than a small body of such kinds of troops as 
can not be had without long training and exercise; as of cavalry and 
artillery. For the rest, nations will rely on their militia, and on the 
excellence of their internal polity: for it is next to impossible to 
conquer a people unanimous in their attachment to their national 
institutions; and their attachment will always be proportionate to 
the loss they will incur by a change of domination.! 

* 
Of the Charges of Public Instruction. 

Two questions have been raised in political economy; 1. Whether 
the public be interested in the cultivation of science in all its 
branches? 2. Whether it be necessary, that the public should be at 
the expense of teaching those branches, it has an interest in cultivat- 
ing? 

Whatever be the position of man in society, he is in constant de- 
pendence upon the three kingdoms of nature. His food, his clothing, 
his medicines, every object either of business or of pleasure, is sub- 
ject to fixed laws; and the better those laws are understood, the 
more benefit will accrue to society. Every individual, from the 
common mechanic, that works in wood or clay, to the prime minis- 
ter that regulates with the dash of his pen the agriculture, the breed- 
ing of cattle, the mining, or the commerce of a nation, will perform 
his business the better^ the better he understands the nature of things, 
and the more his understanding is enlightened. 

For this reason, every advance of science is followed by an in- 

* Those who deny the progressive influence of human reason, must have 
studied history to very little purpose. The perfidy and cruelty of war has con- 
siderably abated, in Europe, more than in Asia or America, and most of all 
amongst the most polished of the European nations. The ungenerous character 
of some recent military enterprises roused so much public indignation, as to 
make them recoil upon the projectors with ruinous violence. 

^ ^, ^"".h^'"^ speaking of the only sure reliance in an enlightened age. A peo- 
ple, that has nothing to lose by a change of domination, may defend itself with 
the most determined gallantry. The Mussulman will rush on certain destruc- 
tion, in the cause of a prince and a faith, that are neither of them worth defending, 
iiut political and religious prejudice will sooner or later fall to the ground; and 
leave mankind to seek for some more reasonable object of devotion. 



CHAP. VI. ON CONSUMPTION. 437 

crease of social happiness. A new application of the lever, or of the 
power of wind or water, or even a method of reducing the friction 
of bodies, will, perhaps, have an influence on twenty different arts. 
An uniformity of weights and measures, arranged upon mathemati- 
cal principles, would be a benefit to the whole commercial world, if 
it were wise enough to adopt such an expedient. An important dis- 
covery in astronomy or geology may possibly afford the means of 
ascertaining the longitude at sea with precision, which would be an 
immense advantage to navigation all over the world. The naturali- 
zation in Europe of a new botanical genus or species might possibly 
influence the comfort of many millions of individuals.* 

Among the numerous classes of science, theoretical and practical, 
which it is the interest of the public to advance and promote, there 
are fortunately many, that individuals have a personal interest in 
pursuing, and which the public, therefore, is not called upon to pay 
the expense of teaching. Every adventurer in any branch of indus- 
try is urged most strongly by self-interest to learn his business and 
whatever concerns it. The journeyman gains in his apprenticeship, 
besides manual dexterity, a variety of notions and ideas only to be 
learnt in the work-shop, and which can be no otherwise recompensed, 
than by the wages he will receive. 

But it is not every degree or class of knowledge, that yields a 
benefit to the individual, equivalent to that accruing to the public. 
In treating abovet of the profits of the man of science, I have shown 
the reason, why his talents are not adequately remunerated; yet 
theoretical is quite as useful to society as practical knowledge; for 
how could science ever be applied to the practical utility of mankind, 
unless it were discovered and preserved by the theorist? It would 
rapidly degenerate into mere mechanical habit, which must soon 
decline; and the downfal of the arts would pave the way for the 
return of ignorance and barbarism. 

In every country that can at all appreciate the benefits to be de- 
rived from the enlargement of human faculties, it has been deemed 
by no means a piece of extravagance, to support academies and 
learned institutions, and a limited number of very superior schools, 
intended not as mere repositories of science, and of the most approved 
mode of instruction, but as a means of its still further extension. 
But it requires some skill in the management, to prevent such esta- 
blishments from operating as an impediment, instead of a further- 
ance, to the progress of knowledge, and as an obstruction rather than 
as an avenue to the improvement of education. Long before the 
revolution, it had become notorious, that most of our French univer- 
sities had been thus perverted from the intention of their founders. 

* Should the expected success attend the attempt to naturalize in Europe the 
flax of New Zealand, which is greatly superior to that of Europe in the length 
and delicacy of the fi-bre, as well as in the abundance of the crop, it is possible 
that fine linen may be produced at the rate now paid for the coarsest quality; 
which would greatly improve the cleanliness and health of the lower classes. 

f Book II. chap. 7. sect. 2. 



438 ON CONSUMPTION. book hi. 

All the principal discoveries were made elsewhere; and most of 
them had to encounter the weight of their influence over the risino- 
generation and credit with men in power.*(l) ^ 

From this example, we may see how dangerous it is, to entrust 
them with any discretionary control. If a candidate presents him- 
self for examination, he must not be referred to teachers, who are at 
the same time judges and interested parties, sure to think well of 
their own scholars, and ill of those of every body else. The merit 
of the candidate should alone decide, and not the place where he 
happens to have studied, nor the length of his probation; for to oblige 
a student in any science, medicine for instance, to learn it at a 
particular place, is, possibly, to prevent his learning it better else- 
where; and, to prescribe any fixed routine of study, is, possibly, to 
prevent his fixing a shorter road. Moreover, in deciding upon com- 
parative merit, there is much unfairness to be apprehended from the 
esprit de corps of such communities. 

Encouragement may, with perfect safety, be held out to a mode 
of instruction of no small efficacy; I mean, the composition of good 
elementaryt works. The reputation and profit of a good book in 

* What was denominated an University, under the reign of Napoleon, was a 
still more mischievous institution; being, in fact, but a most expensive and 
vexatious contrivance, for depraving the intellectual faculties of the rising gene- 
ration, by substituting, in the place of just and correct notions of thino's, opinions 
calculated to perpetuate the political slavery of their country. ° 

t Under this head, I would include, the fundamental parts of knowledge in 
every department, and the familiar instruction adapted to each specific calling, 
respectively; such as would impart at a cheap rate to the hatter, the metal-found- 
er, the potter, the dyer, &c. the general principles of their respective arts. Works 
of this kind keep up a constant channel of communication between the practical 
and theoretical branches, and enable them to profit mutually by each other's 
experience. 



(1) ["It IS chiefly, ' observes Dugald Stewart, "in judging of questions 
coming home to their business and bosoms, that casual associations lead man- 
kind astray; and of such associations, how incalculable is the number arising 
from false systems of religion, oppressive forms of government, and absurd 
plans of education. The consequence is, that while the physical and mathe- 
matical discoveries of former ages present themselves to the hand of the histo- 
rian, like masses of pure and native gold, the truths which we are here in quest 
of may be compared to iron, which although at once the most necessary and the 
most widely diffused of all the metals, commonly requires a discriminatino- eye 
to detect its existence, and a tedious as well as nice process, to extract it^from 
■the ore." 

"To the same circumstance it is owing, that improvements in Moral and in 
Political Science do not strike the imagination *with nearly so great force as the 
discoveries of the Mathematician or of the Chemist. When an inveterate pre- 
judice is destroyed by extirpating the casual associations on which it was graft- 
ed, how powerful is^ihe new impulse given to the intellectual faculties of man. 
Yet how slow and silent the process by which the effect is accomplished! 
Were it not, indeed, for a certain class of learned authors, who, from time to 
time, heave the log into the deep, we should hardly believe that the reason of 
the species IS progressive. In this respect, the religious and academical estab- 
lishments in some parts of Europe are not without their use to the historian of 
.the human mind. Immovably moored to the same station by the strength of 



CHAP. VI. ON CONSUMPTION. 439 

this class do not indemnify the labour, science, and skill, requisite to 
its compositiou.(a) A man must be a fool to serve the public in this 
line where the natural profit is so little proportioned to the benefit 
derived to the public. The want of good elementary books will 
never be thoroughly supplied, until the public shall hold out tempta- 
tions, sufficiently ample to engage first-rate talents in their compo- 
sition. It does not answer to employ particular individuals for the 
express purpose; for the man of most talents will not always suc- 
ceed the best: nor to offer specific premiums; for they are often 
bestowed on very imperfect productions, and the encouragement 
ceases the moment the premium is awarded. But merit in this kind 
should be paid proportionately to its degree, and always liberally. 
A good work will thus be sure to be superseded by a better, till per- 
fection is at last attained in each class. And I must observe, by the 
way, that there is no great expense incurred by liberally rewarding 
excellence; for it must always be extremely rare; and what is a 
great sum to an individual, is a small matter to the pockets of a 
nation. 

These are the kinds of instruction most calculated to promote 
national wealth, and most likely to retrograde, if not in some measure 
supported by the public. There are others, which are essential to 
the softening of national manners, and stand yet more in need of 
that support. 

When the useful arts have arrived at a high degree of perfection, 
and labour has been very generally and minutely subdivided, the 
occupation of the lowest classes of labourers is reduced to one or two 
operations, for the most part simple in themselves, and continually 
repeated: to these their whole thought and attention are directed; 
and from them they are seldom diverted by any novel or unforeseen 
occurrence: their intellectual faculties, being rarely or never called 
into play, must of course be degraded and brutified, and themselves 
rendered incapable of uttering two words of common sense out of 
their peculiar line of business, and utterly devoid of any generous 
ideas or elevated notions. Elevation of mind is generated by enlarg- 
ed views of men and things, and can never exist in a being incapa- 
ble of conceiving the general bearings and connexions of objects. A 
plodding mechanic can conceive no connexion between the inviola- 
bility of property and public prosperity, or how he can be more 
interested in that prosperity, than his more wealthy neighbour; but 
is apt to consider all these important benefits as so many encroach- 
ments on his rights and happiness. A certain degree of education, 

(a) This can only be true where the demand for such works is limited. In 
England, works of instruction are probably amongst the most profitable to the 
authors. T. 



their cables, and the weight of their anchors, they enable him to measure the 
rapidity of the current by which the rest of the world are borne along." 

Vide Preface to StewarVs Dissertations, /). 28, Boston edition.'] 

American Editor. 



440 ON CONSUMPTION. book iii. 

of reading, of reflection while at work, and of intercourse with per- 
sons of his own condition, will open his mind to these conceptions, 
as well as introduce a little more delicacy of feeling into his conduct, 
as a father, a husband, a brother, or a citizen. 

But, in the vast machinery of national production, the mere ma- 
nual labourer is so placed, as to earn little or nothing more than a 
bare subsistence. The most he can do is, to rear his young family, 
and bring them up to some occupation: he cannot be expected to 
give them that education, which we have supposed the well-being of 
society to require. If the community wish to have the benefit of 
more knowledge and intelligence in the labouring classes, it must 
dispense it at the public charge. 

This object may be obtained by the establishment of primary 
schools, of reading, writing, and arithmetic. These are the ground- 
work of all knowledge, and are quite sufficient for the civilization of 
the lower classes. In fact, one can not call a nation civilized, nor 
consequently possessed of the benefits of civilization, until the peo- 
ple at large be instructed in these three particulars: till then it will 
be but partially reclaimed from barbarism. With the help of these 
advantages alone, it may safely be affirmed, that no transcendent ge- 
nius or superior mind will long remain in obscurity, or be prevented 
from displaying itself to the infinite benefit of the community. 
The faculty of reading alone, will, for a few dollars, put a man in pos- 
session of all that eminent men have said or done in the line, to 
which the bent of genius impels. Nor should the female part of the 
creation be shut out from this elementary education; for the public 
is equally interested in their civilization; and they are indeed the 
first, and often the only teachers of the rising generation. 

It would be the more unpardonable in governments to neglect the 
business of education, and abandon to their present ignorance the 
great majority of the population in those nations of Europe, that 
pretend to the character of refinement and civilization, now that the 
improved methods of mutual instruction, that have been tried with 
such complete success, afford a ready and most economical means of 
universally diffusing knowledge amongst the inferior classes.* 

* A.ccording to the new method, introduced by Lancaster, and perfected by 
subsequent teachers, a single master with very little aid of books, pens, or paper, 
can rapidly and effectually teach reading, writing, and vulgar arithmetic, to five 
or six hundred scholars at a time. This truly economical result is produced, 
by taking advantage of the slightest superiority of intelligence of one above 
another, and directing the motive of emulation, natural to the human breast, 
towards an useful object. A large school is commonly divided into forms, con- 
sisting each of eight children, as nearly equal in advancement as possible, and 
instructed by a child somewhat more advanced, called the Monitor. These 
forms again are divided into eight classes; of which the lowest learns to pro- 
nounce the letters of the alphabet, and to trace their figures rudely with the 
finger upon sand spread out upon a flat board; and the highest is able to write upon 
paper, and to practise the four rules of arithmetic. The children of each form 
are ranged according to their progress; and whoever cannot give the answer, is 
immediately superseded by a more apt scholar. As soon as a child is perfected 
in one class, he is transferred to the next in degree. The lessons are received. 



CHAP. VI. ON CONSUMPTION. 44I 

Thus, none but elementary and abstract science, — the highest and 
the lowest branches of knowledge, are so much less favoured in the 
natural course of things, and so little stimulated by the competition 
of demand, as to require the aid of that authority, which is created 
purposely to watch over the public interests. Not that individuals 
have no interest in the support and promotion of these, as well as of 
the other, branches of knowledge; but they have not so direct an in- 
terest, — the loss occasioned by their disappearance is neither so im- 
mediaie nor so perceptible; a flourishing empire might retrograde, 
until it reached the confines of barbarism, before individuals had 
observed the operating cause of its decline. 

I would not be understood to find fault with public establishments 
for purposes of education, in other branches than those I have been 
describing. I am only endeavouring to show, in what branches a 
nation may wisely, and with due regard to its own interest, defray 
the charge out of the public purse. Every diffusion of such know- 
ledge, as is founded upon fact and experience, and does not proceed 
upon dogmatical opinions and assertions, every kind of instruction, 
that tends to improve the taste and understanding, is a positive good; 
and, consequently, an institution calculated to diffuse it must be be- 
neficial. But care must be taken, that encouragement of one branch 
shall not operate to discourage another. This is the general mis- 
chief of premiums awarded by the public; a private teacher or 
institution will not be adequately paid, where the same kind of in- 
struction is to be had for nothing, though, perhaps, from inferior 
teachers. There is, therefore, some danger, that talent may be 
superseded by mediocrity; and a check be given to private exertions, 
from which the resources of the state might expect incalculable 
benefit. 

The only important science, which seems to me not susceptible 
of being taught at the public charge, is that of moral philosophy, 
which may be considered as either experimental or doctrinal. The 
former consists in the knowledge of moral qualities, and of the 
chain of connexion between events dependent upon human will; 
and forms indeed a part of the study of man, which is best pursued 
by social converse and intercourse. The latter is a series of max- 
ims and precepts, possessing very little influence upon human con- 
duct, which is best guided in the relations of public and of private 
life, by the operation of good laws, of good education, and of good 
example.* 

sometimes in a sitting posture, and sometimes upright, with slates affixed to 
the walls. The instruotion is thus always accommodated to the age and facul- 
ties of the child; it necessarily arrests and rewards his attention; and involves 
that personal activity, essential to the infant frame. The whole is conducted 
in a single apartment, and usually under the superintendence of a sinale master 
or mistress. The general adoption of this method will probably be for some 
time opposed by custom and prejudice; but its utility and conformity to the order 
of nature will insure its ultimate and universal prevalence. 

* I am strongly disposed to say the same of logic. Were nothing taught, but 
what is consisfent with truth and good sense, logic would follow of itself as a 
56 



442 ON CONSUMPTION. book hi. 

The sole encouragement to virtue and good conduct, that can 
be relied on, is, the interest that every body has in discovering and 
employing no persons but those of good character. Men the most 
independent in their circumstances want something more to make 
them happy; that is to say, the general esteem and good opinion of 
their fellow-creatures; and these can only be acquired by putting 
on the appearance at least of estimable qualities, which it is much 
easier to acquire than to stimulate. The influence of the sovereign 
or ruling body, upon the manners of the nation, is very extensive, 
because it employs a vast number of people; but it operates less ben- 
eficially than that of individuals, because it is less interested in em- 
ploying none but persons of integrity. If to its lukewarmness in 
this particular be added, the example of immorality and contempt 
for honesty and economy too frequently held out to people by their 
rulers, the corruption of national morals will be wonderfully accel- 
erated.* But a nation may be rescued from moral degradation by 
the re-action of opposite causes. Colonies are, for the most part, 
composed of by no means the most estimable classes of the mother- 
country: in a very short time, however, when the hopes of return 
are wholly abandoned, and the settlers have made up their minds 
to pass the rest of their lives in their new abode, they gradually feel 
the necessity of conciliating the esteem of their fellow-citizens, and 
the morals of the colony improve rapidly. By morals, I mean, 
the general course of human conduct and behaviour. 

These are the causes, that have a positive influence upon national 
morahty. To these must be added, the effect of education in gen- 
eral, in opening the eyes of mankind to their real interests, and 
softening the temper and disposition. 

Religious instruction ought, strictly speaking, to be defrayed by 
the respective religious communions and societies, each of which 
regards the opinions of the rest as heretical, and naturally revolts at 
the injustice of contributing to the propagation of what it deems 
erroneous, if not criminal. 

Of the Charges of Public Benevolent Institutions. 

It has been much debated, whether individual distress has any 
title to public relief. I should say none, except inasmuch as it is 
an unavoidable consequence of existing social institutions. If infir- 

matter of course: all the teaching in the world will never make a man a ffood 
reasoner whose notions and ideas of things are unsound and erroneous- and 

reasoX^l""1uridl^"lv'°"^' ^^ T"^ ^^'l"^^^ no teaching "oTake hi^ 
tfon bv Tiino. 1^ f f ^^'"^' ^'? '"^y *° ^^ ^^q^'^ed by attlntive examina- 
StconcPrnA^^^^^^ them, and of nothing but 

torL!I?fol^u r^'"^^^/^ V^"°"' P'^"''^ ^^ °^ *« "lost fatal tendency; it is no- 
sure to bptfll tT^^'^'.r'^ ^l'''^''^^^ "^""^ ^^"''^^ by pubii<5 authorityf and it IS 
Se servSty''''^ ^ '^'' subservience of courtiers t^ the extreme point of imi- 



CHAP. VI. ON CONSUMPTION. 443 

mity and want be the effect of the social system, they have a title 
to public relief; provided always, that it be shown, that the same 
system affords no means of prevention or cure. But it would be 
foreign to the matter to discuss the question of right in this place. 
All we need do is, to consider benevolent institutions with regard 
to their nature and consequences. 

When a community establishes at the public charge any institu- 
tion for benevolent purposes, it forms a kind of saving bank, to 
which every member contributes a portion of his revenue, lo entitle 
him to claim a benefit, in the event of accident or misfortune. The 
wealthy are gei^erally impressed with an idea, that they shall never 
stand in need of public charitable relief; but a little less confidence 
would become them better. No man can reckon in his own case 
upon the continuance of good fortune, with as much certainty as 
upon the permanence of wants and infirmities; the former may desert 
him; but the latter are inseparable companions. It is enough to 
know, that good fortune is not inexhaustible, to infuse an apprehen- 
sion that it may some day or other be exhausted: one has but to 
look round, and this apprehension will be confirmed by the experi- 
ence of numbers, whose misfortunes were to themselves quite 
unexpected. 

Hospitals for the sick, alms-houses and asylums for old age and 
infancy, inasmuch as they partially relieve the poorer classes from 
the charge of maintaining those, who are naturally dependent on 
them, and thereby to allow population to advance somewhat more 
rapidly, have a natural tendency a little to depress the wages of 
labour. That depression would be greater still, if such establish- 
ments should be so multiplied, as to take in all the sick, aged, and 
infants of those classes, who would then have none but themselves 
to provide for out of their wages. If they wore entirely done 
away, there would be some rise of wages, although not sulficicnt to 
maintain so large a labouring population, as may be kept up with 
their help; for the demand for their labour would be somewhat 
reduced by the advance of its price. 

From these two extreme suppositions, we may judge of the effect 
of those efforts to relieve indigence, which all nations have made in 
some degree or other; and see the reason, why the distress and 
relief go on increasing together, although not exactly in the same 
ratio. 

Most nations preserve a middle course between the two extremes, 
affording public relief to a part only of those, who are helpless from 
age, infancy, or casual sickness. Of the rest they endeavour to rid 
themselves in one of two ways; either by requiring certain qualifi- 
cations in the applicants, whether of age, of specific disease, or, 
perhaps, of mere interest and favouritism; or by limiting narrowly 
the extent of the relief, giving it upon hard terms to the applicants, 
or attaching some degree of shame to the acceptance.* 

* At Paris, the limitation of relief afforded by the Hospice des Incurables, and 
those of Petites Maisons, of St, Louis, of Charite, and many others, is of the 



444 ON CONSUMPTION. 



BOOK III. 



It IS a distressing reflection, that there are no other methods of 
confining the number of applicants for relief within the means 
available to the community, except the offer of hard conditions, or 
the want of a patron. It were to be desired, that asylums of the 
more comfortable class, instead of favouritism, should be open to 
unmerited misfortune only; and that, to prevent improper nomina- 
tions, the pretensions of the candidate should be ascertained by the 
inquest of a jury The rest can probably be protected from too 
pat an influx of indigence, by no other means consistent with 
humanig., except the observance of severe, though impartial, discip- 
ime, sufficient to invest them with some degree of terror 

1 his evil does not apply to the asylums devoted to invalid soldiers 
and sailors Ihe qualification is so plain and intelligible, that the 
doors ought to be shut against none who are possessed of it: and 
the comforts of the institution can never increase the number of 
applicants. Their being nursed in the public asylums with the 
same domestic care and comfort, as are to be found in the homes of 
persons of the same class in life, and indulged in repose, and some 
even of the whims of old age, will undoubtedly somewhat enhance 
he charge that IS to say so far as it might prolong lives, that other- 
wise might fall a sacrifice to wretchedness; but this is the utmost 
increase of charge; and it is one, that neither patriotism nor hu- 
manity will grudge.'^ 

T-J^^^^ ^° n^' °^ industry that are multiplying so rapidly in America, 
Holland, Germany, and France, are noble and excellent institutions 
ol public benevolence. They are designed to provide all persons of 
sound health with work according to their respective capacities: 
some of them are open to any workman out of employ, that chooses 
to apply; others are a kind of houses of correction, where vagrants, 
beggars, and ofi-enders, are kept to work for fixed periods. Con- 
victs have sometimes been set to hard labour in their respective 
vocations, durmg their confinement; whereby the public has been 
wholly or partially relieved from the charge of keeping up gaoL, 
and a method contrived for reforming the morals of the^rimlials 
and rendering them a blessing, instead of a curse, to society. ' 

Indeed, such establishments can hardly be reckoned among the 
tems of public charge; for, the moment their production equals 
their consumption, they are no longer an incumbrance to any body. 
They are of immense benefit in a dense population, where, amidst 

former kind; the admissions to the Hotel-Dim, Bicitre, Saltpetriere, and Enfans- 

exceeds S T^S li' ^t™- ^''°" '" ?-' establishment first mentioned always 
* vfAt ■ ''^Pf,''^*> ' *« choice must ultimately be decided by favour or interest, 
both Jftd 17 ^''T^ consideration, whether it benotmore to the advaSaS ^ 

whose m?nTt .. °^"^ ^^ °''* ^"^ individuals. The Mbe de St. PieL, 
diarae "f IS" •'''' T'-^K^' ^^'^^ ^^"^ '^^ P'^^Jic good, has estimated the 
^ be^thrLTimP '"§■ ?^^T^i^« i» their sumptuous Istablishment at Pari"! 
In'fc Polfp 20r '' '^'' "^ '^''' "^^i"*«"^"«« ^t their respective homes 



CHAP. VI. ON CONSUMPTION. 445 

the vast variety of occupations, some must unavoidably be in a state 
of temporary inaction. The perpetual shiftings of commerce, the 
introduction of new processes, the withdrawing of capital from a 
productive concern, accidental fire, or other calamity, may throw 
numbers out of employment; and the most deserving individual 
may, without any fault of his own, be reduced to the extreme of 
want. In these institutions, he is sure of earning at least a subsist- 
ence, if not in his own line, in one of a similar description. 

The grand obstacle to such establisliments is, the great outlay of 
capital they require. They are adventures of industry, and as such 
must be provided with a variety of tools, implements, and machines, 
besides raw material of different kinds to work upon. Before they 
can be said to maintain themselves, they must earn enougli to pay 
the interest of the capital embarked, as well as their current 
expenses. 

The favour shown them by the public authority, io the gratuitous 
supply of the capital and buildings, and in many other particulars, 
would make them interfere with privateundertakings, were they not 
subject, on the other hand, to some peculiar disadvantages. They 
are obliged to confine their operations to such kinds of work, as sort 
with the feebleness and general inferiority in skill of the inmates, 
and can not direct them to such as may be most in demand. More- 
over, it is in most of them a matter of regulation and police, to lay 
by always the third or fourth part of the labourer's wages or earn- 
ings, as a capital to set him up, on his quitting the establishment: 
this is an excellent precaution, but prevents their woi'king at such 
cheap rates, as to drive all competition out of the market. 

Although the honour, attached to the direction and management 
of institutions of public benevolence, will generally attract the 
gratuitous service of the affluent and respectable part of the com- 
munity, yet, when the duties become numerous and laborious, they 
are commonly discharged by gratuitous administrators with the 
most unfeeling negligence. It was probably by no means wise, to 
subject all the hospitals of Paris to a general superintendence. At 
London, each hospital is separately administered; and the whole are 
managed with more economy and attention in consequence. A 
laudable emulation is thereby excited amongst the managers of rival 
establishments; which affords an additional proof of the practicabi- 
lity and benefit of competition in the business of public adminis- 
tration. 

Of the Charges of Public Edifices and Works. 

I shall not here attempt to enumerate the great variety of works 
requisite for the use of the public; but merely lay down some gene- 
ral rules, for calculating their cost to the nation. It is often impos- 
sible to estimate with any tolerable accuracy the public benefit deriv- 
ed from them. How is one to calculate the utility, that is to say, 
the pleasure, which the inhabitants of a city derive from a public 



446 ON CONSUMPTION. book hi. 

terrace or promenade? It is a positive benefit to have, within an 
easy distance of the close and crowded streets of a populous town, 
®Ome place where the population can breathe a pure and wholesome 
atmosphere, and take health and exercise, under the shade of a 
grove, or with a verdant prospect before the eye; and where school- 
boys can spend their hours of re-creation; yet this advantage it 
would be impossible to set a precise value upon. 

The amount of its cost, however, may be ascertained or esti- 
mated. The cost of every public work or construction consists: — 

1. Of the rent of the surface whereon it is erected; which rent 
amounts to what a tenant would give for it to the proprietor. 

2. Of the interest of the capital expended in the erection. 

3. Of the annual charge of maintenance. 

Sometimes, one or more of these items may be curtailed. When 
the soil, whereon a public work is erected, will fetch nothing from 
either a purchaser, or a tenant, the public will be charged with 
nothing in the nature of rent; for no rent could be got if the spot 
had never been built on. A bridge, for instance, costs nothing but 
the interest of the capital expended in its construction, and the 
annual charge of keeping it in repair. If it be suffered to fall into 
decay, the public consumes, annually, the agency of the capital 
vested, reckoned in the shape of interest on the sum expended, and, 
gradually, the capital itself, into the bargain; for, as soon as the 
bridge ceases to be passable, not only is the agency or rent of the 
capital lost, but the capital is gone likewise. 

Supposing one of the dikes in Holland to have cost in the outset, 
20,000 dollars; the annual charge on the score of interest, at 5 per 
cent, will be 1000 dollars; and, if it cost 600 dollars more in the 
keeping it up, the total annual charge will be 1600 dollars. 

The same mode of reckoning may be applied to roads and canals. 
If a road be broader than necessary, there is annually a loss of the 
rent of all the superfluous land it occupies, and, besides, of all the 
additional charge of repair. Many of the roads out of Paris are 
180 feet wide, including the unpaved part on each side; whereas, a 
breadth of 60 feet would be full wide for all useful purposes, and 
would be quite magnificent enough, even for the approaches to a 
great metropolis. The surplus is only so much useless splendour; 
indeed, I hardly know how to call it so; for the narrow pavement 
in the centre of a broad road, the two sides of which are impassable 
the greater part of the year, is an equal imputation upon the libera- 
lity, and upon the good sense and taste of the nation. It gives a 
disagreeable sensation, to see so much loss of space, more particu- 
larly if it be badly kept. It appears like a wish to have magnificent 
roads, without having the means of keeping them uniform and in 
good condition; like the palaces of the Italian nobles, that never feel 
the effects of the broom. 

Be it as it may, on the sides of the road I am speaking of, there 
is a space of 120 feet, that might be restored to cultivation; that is to 
say, 48 acres to the ordinary league. Add together the rent of the 



CHAP. VI. ON CONSUMPTION. 447 

surplus land, the interest of the sum expended in the first cost and 
preparation, and the annual charge of keeping up the unnecessary- 
space, which is something, badly as it is kept up; you will then 
ascertain the sum France pays annually for the very questionable 
honour of having roads too wide, by more than the half, leading 
to streets too narrow, by three-fourths.* 

Roads and canals are costly public works, even in countries where 
they are under judicious and economical management. Yet, proba- 
bly, in most cases, the benefits they afford to the community far 
exceed the charges. Of this the reader may be convinced, on re- 
ference to what has been said above of the value generated by the 
mere commercial operation of transfer from one spot to another,t and 
of the general rule, that every saving in the charges of production is 
so much gain to the consumer. J Were we to calculate what would 
be the charge of carriage upon all the articles and commodities, that 
now pass along any road in the course of a year, if the road did not 
exist, and compare it with the utmost charge under present circum- 
stances, the whole difference, that would appear, will be so much gain 
to the consumers of all those articles, and so much positive and clear 
net profit to the community. § 

Canals are still more beneficial; for in them the saving of carriage 
is still more considerable. || 

Public works of no utility, such as palaces, triumphal arches, 
monumental columns, and the like, are items of national luxury. 
They are equally indefensible, with instances of private prodigality. 
The unsatisfactory gratification afforded by them to the vanity of the 
prince or the people, by no means balances the cost, and often the 
misery, they have occasioned. 

* With all this waste of space in the great roads of France, there are in none 
of them either paved or gravelled foot-ways, passable at seasons, or stone seats, 
for the travellers to rest upon, or places of temporary shelter from the weather, 
or cisterns to quench the thirst; all which might be added with a very trifling 

^^^lESk I. chap. 9. t Book II. chap. 3. 

§ To say, that, if the road were not in existence, the charge of transport could 
never be so enormous as here suggested, because the transport would never take 
place at all, and people would contrive to do without the objects of transport, 
would be a strange way of eluding the argument. Self-denial of this kind, en- 
forced by the want of means to purchase, is an instance of poverty, not of wealth. 
The poverty of the consumer is extreme, in respect to every object he is thus made 
too poor to purchase; and he becomes richer in respect to it, in proportion as its 
price or value declines. . .i u 

11 In lieu of canals, iron rail-roads from one town to another, will probably be 
one day constructed. The saving in the costs of transport would probably ex- 
ceed the interest of the very heavy expense in the outset. Besides the addi- 
tional facility of movement, roads of this kind would remedy the violent jolting 
of passengers and goods. Undertakings of such magnitude can only be prose- 
cuted in countries, where capital is very abundant, and where the government 
inspires the adventurers with the firm assurance of reaping themselves the pro- 
fit of the adventure. 



448 ON CONSUMPTIOl 



BOOK III. 



CHAPTER VII. 

OF THE ACTUAL CONTRIBUTORS TO PUBLIC CONSUMPTION. 

A PORTION of the objects of public consumption have, in some very 
rare instances, been provided by a private individual. We see occa- 
sional acts of private munificence, in the erection of a hospital, the 
laying out of a road, or of public gardens upon the land, and at the 
cost, of an individual. In ancient times, examples of this kind were 
more frequent, though much less meritorious. The private opulence 
of the ancients was commonly the fruit of domestic, or provin- 
cial, plunder and speculation, or perhaps the spoil of a hostile nation, 
purchased with the blood of fellow-citizens. Among the moderns, 
though such excess do sometimes occur, individual wealth is, in the' 
great majority of cases, the fruit of personal industry and economy. 
In England, where there are so many institutions founded and sup- 
ported by private funds, most of the fortunes of the founders and 
supporters have been acquired in industrious occupations. It re- 
quires a greater exertion of generosity to sacrifice wealth, acquired 
by a long course of toil and self-denial, than to give away what has 
been obtained by a stroke of good fortune, or even by an act of 
lucky temerity. 

Among the Romans, a further portion of the public consumption 
was supplied directly by the vanquished nations who were subjected 
to a tribute, which the victors consumed. 

In most modern states, there is some territorial property vested 
either in the nation at large, or in the subordinate communities' 
cities, towns, and villages, which is leased out, or occupied directly 
by the public. In France, most of the public lands of tillage and 
pasturage, with their appurtenances, are let out on lease; the govern- 
ment reserving only the national forests under the direct adminis- 
tration of Its agents. The produce of the whole forms a considera- 
able Item in the catalogue of public resources. 

But these resources consist for the most part, of the produce of 
taxes levied upon the subjects or citizens. These taxes are some- 
times national, that is, levied upon the whole nation, and paid into 
the general treasury of the state, whence the public national expen- 
diture IS defrayed; and sometimes local, or provincial, that is, levied 
upon the inhabitants of a separate canton or province only, and paid 
into the local treasury, whence are defrayed the local expenses. 

It IS a principal of equity, that consumption should be charged to 
those who derive gratification from it; consequently, those coun- 
tries must be pronounced to be the best governed, in respect of taxa- 
tion, where each class of inhabitants contributes in taxation propor- 
tionately to the benefit derived by it from the expenditure. 

iiivery individual and class in the community is benefited by the 
central administration, or, in other words, the general government: 



CHAP. VII. ON CONSUMPTION. 449 

so likewise of the security afforded by the national military estab- 
lishment; for the provinces can hardly be secure from external 
attack', if the enemy have possession of the metropolis, and can 
thence overawe and control them; imposing laws upon districts 
where his force has not penetrated, and disposing of the lives and 
property even of such as have not seen the face of an enemy. For 
the same reason the charge of fortresses, arsenals, and diplomatic 
agents is properly thrown upon the whole community. 

It would seem, that the administration of justice should be classed 
among the general charges, although the security and advantage it 
affords have more of a local character. When the magistracy of 
Bordeaux arrests and tries an ofiender, the public internal security of 
France is unquestionably promoted. The charge of gaols and court- 
houses necessarily follows that of the magistracy. Smith has ex- 
pressed an opinion, that civil justice should be defra3'ed by the liti- 
gating parties; Avhich would be more practicable than at present, 
were the judges in the appointment of the parties in each particular 
case, and no otherwise in the nomination of the public authority, 
than inasmuch as the choice might be limited to specified persons of 
approved knowledge and integrity. They would then be arbitra- 
tors, and a sort of equitable jurors, and might be paid proportion- 
ately to the matter in dispute without regard to the length of the 
suit; and would thus have an obvious interest in simplifying the 
process, and sparing their own time and trouble, as well as in attract- 
ing business by the general equity of their decisions. («.) 

But local administration and local institutions of utility, pleasure, 
instruction, or benificence, appear to yield a benefit exclusively to 
the place or district where they are situated. Wherefore, it should 
seem, that their expenses ought to fall, as in most countries they do, 
upon the local population. Not but that the nation at large derives 
some benefit from good provincial administration, or institutions. A 
stranger has access to the public places, libraries, schools, walks, 
and hospitals of the district; but the principal benefit unquestiona- 
bly results to the immediate neighbourhood. 

It is good economy to leave the administration of the local re- 
ceipts and disbursements to the local authorities; particularly where 

(a) Our author seems in this passage to have become a convert to the opinion 
of Smith, in respect to the civil tribunals of a nation, from which he had ex- 
pressed his dissent, in former editions. Though arbitration may be a very good 
mode of settling civil suits, where the parties are both anxious to come to a set- 
tlement, and indeed is frequently resorted to, and should always be encouraged; 
yet it is manifest, that there must be a compulsory tribunal for the obstinate, or 
refractory. And, since security of person and property is the main object of 
social institutions, it is but just, that invasion in a particular instance should be 
repelled and deterred at the public charge. In strict justice, the invader should 
be held to make good the whole damage; and so he is or ought to be, in the 
shape of costs, fine, damages, or otherwise. But it is not consistent with equi- 
ty that the sufiFerer should be deterred from pursuing his claim, by superadding 
a proportion of the outlay upon the judicial establishments to the charge of 
witnesses and agents, which he must necessarily advance, and to the risk of in- 
ability in the delinquent, even in the event of ultimate success. T. 
57 



450 ON CONSUMPTION. . book iii. 

they are appointed by those, whose funds they administer. There 
is much less waste, when the money is spent under the eye of those 
who contribute it, and who are to reap the benefit j besides, the ex- 
pense IS better proportioned to the advantage expected. When one 
passes through a city or town badly paved and ih-conditioned, or 
sees a canal or harbour in a state of dilapidation, one may conclude, 
in nine cases out of ten, that the authorities, who are to administer 
the funds appropriated to those objects, do not reside on the spot. 

In this particular, small states have an advantage over more exten- 
sive ones. They have more enjoyment from a less expenditure upon 
objects of public utility or amusement; because they are at hand to 
see that the funds, destined to the object, are faithfully applied. 



CHAPTER VIII. 

OF TAXATION. 

Section I. 
Of the Effect of all kinds of Taxation in general. 

Taxation is the transfer of a portion of the national products 
from the hands of individuals to those of the government, for the 
purpose of meeting the public consumption or expenditure. What- 
ever be the denomination it bears, whether tax, contribution, duty, 
excise, custom, aid, subsidy,* grant, or free gift, it is virtually a bur- 
then imposed upon individuals, either in a separate or corporate cha- 
racter, by the ruling power for the time being, for the purpose of 
supplying the consumption it may think proper to make at their 
expense; in short, an impost, in the literal sense. 

It would be foreign to the plan of this work, to inquire in whom 
the right of taxation is or ought to be vested. In the science of po- 
litical economy, taxation must be considered as matter of fact, and 
not of right; and nothing further is to be regarded, than its nature, 

* What avails it, for instance, that taxation is imposed by consent of the peo- 
ple or their representaUves, if there exists in the state a power, that by its acts can 
leave the people no alternative but consent? Be Lolme in his Essay on the English 
Co7isiiiutwn, says that the right of the Crown to make war is nugatory, while 
the people have the right of refusing the supplies for carrying it on. Mav 
It not be said, with much more truth, that the right of the people to deny 
the supplies IS nugatory, when the crown has involved them in a predicament 
that makes consent a matter of necessity? The liberties of Great Britain have 
no real security, except in the freedom of the press; which rests itself, rather 
upon the habits and opinions of the nation, than upon legal enactments or judi- 
cial decisions. A nation is free, when it is bent on freedom; and the most for- 
midable obstacle to the establishment of civil liberty is the absence of the desire 



CHAP. VIII. ON CONSUMPTION. * 451 

the source whence it derives the values it absorbs, and its effect upon 
national and individual interests. The province of this science ex- 
tends no further. 

The object of taxation is, not the actual commodity, but tlie 
value of the commodity, given by the tax-payer to the tax-gatherer. 
Its being paid in silver, in goods, or in personal service, is a mere 
accidental circumstance, which may be more or less advantageous to 
the subject or to the sovereign. The essential point is, the value of 
the silver, the goods, or the service. The moment that value is part- 
ed with by the tax-payer, it is positively lost to him; the moment 
it is consumed by the government or its agents, it is lost to all the 
world, and never reverts to, or re-exists in society. This, 1 appre- 
hend, has already been demonstrated, when the general effect of pub- 
lic consumption was under consideration. It was there shown, that 
however the money levied by taxation may be refunded to the na- 
tion, its value is never refunded; because it is never returned gra- 
tuitously, or refunded by the public functionaries, without receiving 
an equivalent in the way of barter or exchange. 

The same causes, that we have found to make unproductive con- 
sumption nowise favourable to reproduction, prevent taxation from 
at all promoting it. Taxation deprives the producer of a product, 
which he would otherwise have the option of deriving a personal 
gratification from, if consumed unproductively, or of turning to 
profit, if he preferred to devote it to an useful employment. One pro- 
duct is a means of raising another; and, therefore, the subtraction of 
a product must needs diminish, instead of augmenting, productive 

power. . , , 1 

It may be urged, that the pressure of taxation impels the produc- 
tive classes to redouble their exertions, and thus tends to enlarge the 
national production. I answer, that, in the first place, mere exertion 
can not alone produce, there must be capital for it to work upon, and 
capital is but an accumulation of the very products, that taxation 
takes from the subject: that, in the second place, it is evident, that 
the values, which industry creates expressly to satisfy the demands 
of taxation, are no increase of wealth; for they are seized on and de- 
voured by taxation. It is a glaring absurdity to pretend, that taxa- 
tion contributes to national wealth, by engrossing part of tiie national 
produce, and enriches the nation by consuming part ol its wealth. 
Indeed, it would be trifling with my reader's time, to notice such a 
fallacy, did not most governments act upon this principle, and had 
not well-intentioned and scientific writers endeavoured to support 
and establish it.* 

* By the same reasoning it has been attempted to prove, that lu'^uO'anJ bar- 
ren consumption operate al a stimulus to production. \ et they are less mis- 
hUo'sthSn taxaLn; inasmuch as they -^-"VVla^a'tSn^aSuS S^S 
of the party himself: whereas, to use the expedient ot taxation as a « ' ""|a"^e 
to increS production, is to redouble the exertions of the community, for the 
sole uurnose of multiplying its privations, rather than its enjoyments. For, it 
increS taxation be LpUed to the support of a complex, overgrown, and osten- 
.Ss inte^ai adminiJt'ration, or of - superfluous and disproportionate^^ 
establishment, that may act as a drain of individual wealth, and ot the newer 



452 ON CONSUMPTION. 

If, from the circumstance, that the nations most grievously taxed 
are those mos abounding m wealth, as Great Britain, for example, 
we are desired to infer that their superior wealth arises from theii' 
heavier taxation. It vvould be a manifest inversion of cause and effect. 
A man is not rich, because he pays largely; but he is able to pay 
largely, because he is rich. It would b"e not a little ridiculous, ff a 
man should think to enrich himself by spending largely, because he 
sees a rich neighbour doing so. It must be cleJr, th'at^the iXiian 
rs^ending"'' " '" "'^' ^'' "^^"- ^^" --"ch himself by the act 

Cause an'd effect are easily distinguished, when they occur in suc- 

^Z^.ZZt''' ^^"'°""'^^' -^^" ''^ °p--^- ^^ --^-o- 

Hence, it is manifest, that, although taxation may be, and often is, 

Ituw". °^J'7'"S :f ^^^:^ay^ attended with mischief in the outset 
And this mischief good princes and governments have always en- 
deavoured to render as inconsiderable to their subjects as possible, by 

he lloTJsllTTJ^ '"^ ^/ ^^^^>^'"S' ^'' '' t^- ^"11 -tent o^ 
loidH Th -^'-i"' '° «"«1\ extent only as is absolutely una- 
voidable. That rigid economy is the rarest of princely virtues is 
ZZV^ "'-eumstance of the throne being constantly beset ^^^th 
individuals, who are interested in the absenc? of it; and who are al- 
ways endeavouring, by the most specious reasoning, to impress the 
conviction, that magnificence is conducive to publirprosperity and 
thatprofuse pub ic expenditure is beneficial to the state^ It^s the 
st^tatiol '' ' '"''' '' ^"P°^^ *^ ^^^"^^'^-^ °f such repre- 
Others there are, who are not impudent enough to pretend that 

S!lt ''lT^"T" ^' ? P"'^^^'^ "^^"^fi^' yet undertake" to sh^ow b7ar tl 
metical deduction, that the people are scarcely burlhened at all and 

adv se^r who thT 1 f /^^ f ""'^ '' ^''^^^'^ ^y ^ '^^ "f flattering 
advisers, who think to make their court to him by perpetually sup- 

fhe mfst^lTrt'tir' "^^'^^ "°"%^' ^^-^arged^fu^nct^ioS^^^^ 
the most part whose experience of the sweets of office has left no 
other impression, than the tincture of the baneful art of fisal extor- 
tion; and who seek to recommend themselves to power and favour 
by commending it to the lips of royalty.^'* ^ ' 

the cofes'ofTe'm^?n":"^ T^''''^ ^"^ ^"^^^ '^^ ^^^^-^« f°^' ^Hi-S 
Ent nn nL ^^ P"^^^^, as they assert, without fleecing the subiect 

dther fr?^"the ^^ZV " f ""'M' ^'^ government, without ta/dng 
X unlL it b^e n^n ° T '^r §°^^^"^^"t itself in some other 
way, unless it be a downright adventure of industry Someihino- 
can not be produced out of'nothing by a mere touch" of thrwamf 
However an operation may be cloaled'^in mysteryTLweyer often 

were a benefit ofle firsS/nitadt^'^^ "' ' ^"'^'"' ^""^^'^ ""^^'^"^^' ^' '^ i* 
* Mmoires, liy. XX. 



CHAP. VIII. ON CONSUMPTION. 453 

we may twist and turn and transform values, there are but two ways 
of obtaining them, namely, creating oneself, or taking from others. 
The best scheme of finance is, to spend as little as possible; and the 
best tax is always the lightest. 

Admitting these premises, that taxation is the taking from in- 
dividuals a part of their property* for public purposes: that the value 
levied by taxation never reverts to the members of the community, 
after it has once been taken from them; and that taxation is not itself 
a means of reproduction; it is impossible to deny the conclusion, 
that the best taxes, or, rather those that are least bad, are 

1. Such as are the most moderate in their ratio. 

2. Such as are least attended with those vexatious circumstances, 
that harass the tax-payer without bringing any thing into the public 
exchequer. 

3. Such as press impartially on all classes. 

4. Such as are least injurious to reproduction. 

5. Such as are rather favourable than otherwise to the national 
morality; that is to say, to the prevalence of habits, useful and bene- 
ficial to society. 

These positions are almost self-evident; yet I shall proceed to 
illustrate them successively, with some few observations. 

1. Of such as are most moderate in their ratio. 

Since taxation does, in point of fact, deprive the tax-payer of a 
product, which is to him, either a means of personal gratification, or 
a means of reproduction, the lighter the tax is, the less must be the 
privation. 

Taxation, pushed to the extreme, has the lamentable effect of 
impoverishing the individual, without enriching the state. We may 
readily conceive how this can happen, if we recall to our attention 
the former position; viz. that each tax-payer's consumption, whether 
productive or not, is always limited to the amount of his revenue. 
No part of his revenue, tlierefore, can be taken from him without 
necessarily curtailing his consumption in the same ratio. This must 
needs reduce the demand for all those objects he can no longer con- 
sume, and particularly those affected by taxation. The diminution 
of demand must be followed by diminution of the supply of pro- 
duction; and, consequently, of the articles liable to taxation. Thus, 
the tax-payer is abridged of his enjoyments, the producer of his 
profits, and the public exchequer of its receipts.! 

* It is hardly necessary to controvert an opinion, entertained by sovereigns in 
times past, respecting the property of their subjects. We find Louis XIV .^ 
writing in these terms, professedly for the instruction of iiis son in matters ot 
government: "Kings are absolute lords naturally possessing the entire and un- 
controlled disposal of all property, whether belonging to the church or to the 
laity, to be exercised at all times with due regard to economy, and to the gene- 
ral interests of the state." (Euvres de Louis XIV., Mcmoires Jlist. J. J). 16G6. 

I In France before I78i) the average annual consumption of salt was estimat- 
ed at 9 lbs. per head in the districts subject to the gabelle, and at 18 lbs. per 
head in those exempt from that impost. Be Monthieu, Injlumce dcs divers Jm- 
pots, p. 141. Thus, taxation in this form obstructed the production of 1-2 



454 ON CONSUMPTION. bookiii. 

This is the reason why a tax is not productive to the public 
exchequer, in proportion to its ratio: and why it has become a sort 
of apophthegm, that two and two do not make four in the arithmetic 
of finance. Excessive taxation is a kind of suicide, whether laid 
upon objects of necessity, or upon those of luxury; but there is this 
distinction, that, in the latter case, it extinguishes only a portion of 
the products on which it falls, together with the gratification they 
are calculated to afford; while, in the former, it extinguishes both 
production and consumption, and the tax -payer into the bargain. 

Were it not almost self-evident, this principle might be illus- 
trated, by abundant examples of the profit the state derives from a 
moderate scale of taxation, where it is sufficiently awake to its real 
interests. 

When Turgot, in 1775, reduced to 4 the market-dues and duties 
of entry upon fresh sea-fish sold in Paris, their product was nowise 
diminished. The consumption of that article must, therefore, have 
doubled, the fishermen and dealers must have doubled their concerns 
and their profits; and, since population always increases with 
increasing production, the number of consumers must have been 
enlarged; and that of producers must have been enlarged likewise; 
for an increase of profits, that is to say, of individual revenue, mul- 
tiplies savings, and thus generates the multiplication of capital and 
of families; and that very increase of production will, beyond all 
doubt, augment the product of taxation in other branches; to say 
nothing of the popularity accruing to the government from the 
alleviation of the national burthens. 

The government agents, who farm or administer the collection of 
the taxes, very often abuse their interest and authority, to construe 

of this article in the districts subjected to it, and reduced to 1-2 the enjoyment 
it was capable of affording; to say nothing of the other mischiefs resulting from 
it; the injury to tillage, to the feeding of cattle, and to the preparation of salted 
goods; the popular animosity against the collectors of tax, the consequent in- 
crease of crime and conviction, and the consignment to the gallies of numerous 
individuals, whose industry and courage might have been made available to the 
increase of national opulence. 

In 1804, the English government raised the duties on sugar 20 per cent. It 
might have been expected, that their average product to the public exchequer 
would have been advanced in the same ratio; i. e. from 2,778,000/. the former 
amount, to 3,330,000/.: instead of which the increased duties produced but 
2,537,000/.; exhibiting an absolute deficit. Speech of Henry Brougham, Esq. 
M. P. March 13, 1817. 

The people of Great Britain might consume French wines at a very little ad< 
vance upon the prices of France, and have the enjoyment of an unadulterated^ 
wholesome, and exhilarating beverage, costing perhaps a shilling a bottle. But 
the exorbitant duty upon this article has reduced its import and the product of 
the duty to a very trifle; and thus, the sole benefit resulting from the tax to the 
British nation is, the total privation of a cheap and wholesome object of con- 
sumption. 

The two last examples are a sufficient answer to the objection taken by Ri- 
cardo to this passage of my text; on the ground that taxation is not. injurious to 
production in the aggregate, inasmuch as the consumption of the state itself re- 
places that of individuals, which is annihilated by the tax. A tax, that robs the 
individual, without benefit to the exchequer, substitutes no public consumption 
whatever, in place of the private consumption it extinguishes. 



9iHI 



CHAP. VIII. ON CONSUMPTION. 455 

all doubtful points of fiscal law in their own favour, and sometimes 
to create obscurity for the purpose of profiting by it. The efiect is 
precisely the same, as if the scale of taxation were raised pro 
tanto* Turgot adopted a contrary course, and made it a rule to 
lean always to the side of the tax-payer. The public contractors 
made a great outcry at this innovation, declaring that it was impos- 
sible for them to fulfil their engagements, and offering to collect on 
the government account and risk. The event, however, falsified 
their predictions by an actual increase of the receipts. The greater 
lenity in the collection proved so advantageous to production, and 
the consumption, consequent upon it, that the profits, which had 
before not exceeded 10,550,000 liv., rose to 60,000,000 liv.\ an 
advance which could hardly be credited, if it were not attested by 
unquestionable evidence.t 

We are told by Humboldt,f to whom we are indebted for a 
variety of valuable information, that in thirteen years from 1778, 
during which time Spain adopted a somewhat more liberal system 
of government in regard to her American dependencies, the increase 
of the revenue in Mexico alone amounted to no less a sum than 100 
millions of dollars; and that she drew from that country, during the 
sameperiod, an addition in the single article of silver, to the amount of 
14,500,000 dollars. We may naturally suppose, that, in those years 
of prosperity, there was a corresponding, and rather greater increase 
of individual profits; for that is the source, whence all public reve- 
nue is derived. 

A similar course of conduct has invariably been followed by a 
similar effect;§ and it is a great satisfaction to a writer of liberal 

* Of this a striking instance is given in a work entitled, Diveraes Idees sur la 
Legislation et P Administration, par M. C. St. Paul. One of the principal bank- 
ers of Paris having died in 1817, the duty on legacies and inheritance was levied 
upon the aggregate of his credit-account, and not upon the balance, after deduct- 
ing the debits; and this by virtue of a proviso in the revenue laws, which charges 
the duty upon the gross estate of a defunct, and not upon the residue after the 
discharge of the outstanding claims. The danger of fraud upon the revenue in 
stating the account, is not sufficient to justify the exaction of more than is fairly 
due. 

The same department is in the habit of giving no notice to the executors or 
other parties, of the payments falling due, until after the legal time has expired, 
in the hope of incurring the penalty of default. The revolution has abolished 
this official and fiscal severity; but it was revived by the imperial government, 
and has been acted upon ever since. A clerk or officer has no chance of pro- 
motion, unless he shows a disposition on all occasions to postpone the interests 
of the public to" those of the exchequer. 

f CEuvres de Turgot, torn. i. p. 170. The accounts of the farmers-general 
were minutely stated, and rigidly investigated, because the crown participated 
in their profits. 

If. Essai Pol. sur la Nouvelle Espagne, liv. v. c. 12. 

§ This position is further confirmed by an instance mentioned in a letter, ad- 
dressed in 1785, by the then Marquis of Lansdowne to the JMc Murelld, stating, 
' that in respect to the article of tea, the good elTect of the reduction of duty had 
surpassed all expectation. The amount of sale had advanced from 5,000,000 
lbs. to 12,000,000 lbs., in spite of many unfavourable circumstances; besides 



456 ON CONSUMPTION. book iii. 

principles to be able to prove by experience, that moderation is the 
best policy.* 

Upon the same principles, it will be easy to demonstrate in the 
next place, that the taxes least mischievous are: 

2. Such as are least attended with those vexatious circumstances, 
that harass the tax-payer, without bringing any thing into the public 
exchequer. 

It has been held by many, that the costs of collection are no very 
great evil, inasmuch as they are refunded to the community in some 
other shape. On this head, I must refer my readers to what has 
been already observed. t These costs are no more refunded, than 
the net proceeds of the taxes themselves; because both the one and 
the other consists in reality, not of the money, wherein the taxes 
are paid, but of the value, wherewith the tax-payer procures that 
money, and the value which the government again procures with it; 
which latter is destroyed and consumed outright. 

The necessities of princes have operated far more effectually than 
their regard to the public good, to introduce the practice of better 
order and economy in the financial departments of most European 
states during the two last centuries, than in former times. The 
people are generally made to bear as much as they can well stand 
under; so that ever)^ saving in the charge of collection has gone to 
swell the receipts of the exchequer. 

Sully tells us in his Memoirs,! that, for about 6 millions of dollars 
brought into the royal treasury, in 1598, by means of taxation, indi- 
viduals were out of pocket about 30 millions of dollars, and assures 
us, that he had with great pains ascertained the fact, however incre- 
dible it might appear. Under the administration of Necker, upon a 

which, smuggling had been so much crippled, that the public revenue had been 
increased to a degree that astonished every body.' 

* This doctrine has been combated by Ricardo, in his Principles of Poli- 
tical Economy and Taxation. That writer maintains, that since the amount 
and the product of industry is always proportionate to the quantum of the 
capital engaged in it, the extinction of one branch by taxation must needs be 
compensated by the product of some other, towards which the industry and cap- 
ital, thrown out of employ, will naturally be diverted. I answer, that when- 
ever taxation diverts capital from one mode of employment to another, it anni- 
hilates the profits of all who are thrown out of employ by the change, and di- 
minishes those of the rest of the community; for industry may be presumed to 
have chosen the most profitable channel. 1 will go further and say, that a forci- 
ble diversion of the current of production annihilates many additional sources 
of profit to industry. Besides, it makes a vast difference to the public prosperi- 
ty, whether the individual or the state be the consumer. A thriving and lucra- 
tive branch of industry promotes the creation and accumulation of new capital; 
whereas, under the pressure of taxation, and accumulation of new capital, it ceases 
to be lucrative; capital diminishes gradually instead of increasing; wealth and 
production decline in consequence, and prosperity vanishes, leaving behind the 
pressure of unremitting taxation. Ricardo has endeavoured to introduce the 
unbending maxims of geometrical demonstration; in the science of political econ- 
omy, there is no method less worthy of reliance. 
, t Chap. V. sect. I. X Liv. xx. 



CHAP. VIII. ON CONSUMPTION. 457 

revenue of about 110 millions of dollars, the charges of collection 
amounted to no more than 10 millions of dollars; yet, under his 
management, there were 250,000 persons employed in the collection, 
most of them, however, had other collateral occupations. The 
charge was, therefore, about 10 4-5 per cent; yet this is much higher 
than the rate at which the business is done in England.* 

Besides the charge of collection, there are other circumstances, 
that are burthensome to the people without being productive of gain 
to the public revenue. Law suits, imprisonment and other preven- 
tive measures, entail additional expense, without procuring the 
smallest increase of revenue. And this addition is sure to fall on 
the most necessitous class of tax-payers; for the other classes pay 
without litigation or constraint. Such odious means of enforcing 
the payment of taxes are precisely the same as demanding of a man 
12 dollars because he has not wherewithal to pay 10 dollars. Rigour 
is never necessary to enforce taxation where it presses lightly on the 
resources of individuals; but when a state is so unfortunate, as to be 
obliged to impose heavy burthens, of two evils, the process of levy 
by distress is preferable to that of personal constraint. For at any 
rate, by seizing and selling the tax-payer's goods, and thereby rais- 
ing the arrears of his taxes, he is compelled to pay no more than is 
due; and the whole of what he does pay goes into the public purse. 

On this account it is, that works executed by the public requisi- 
tion of labour, as the roads were in France under the old regime, 
are always a mischievous kind of taxation. The time lost by the 
labourers put in requisition in coming three or four leagues, per- 
haps, to their work, and that which is always wasted by people who 
get no pay, and work against their inclination, is all a dead loss to 
the public, with no return of revenue. Even supposing the work 
to be well executed, there is often more loss incurred by the inter- 
ruption of the regular agricultural pursuits, than gain made from the 
compulsory employment that has been substituted. Turgot called 
upon the surveyors and engineers of the respective provinces for an 
estimate of the avei'age expense, one year with another, of keeping 
up old roads, and constructing the usual number of new ones, 
directing tliem to make their calculations on the most liberal scale. 
The estimate of the annual expense, made in compliance with his 
orders, amounted to 2 millions of dollars for the whole kingdom: 
whereas, according to the calculations of Turgot, the old corvle 
system involved a sacrifice to the nation of 8 millions of dollars. t 

Days of rest, enjoined either by law, or by custom and usage too 
powerful to be infringed upon, are another kind of taxation, pro- 
ductive of nothing to the public purse. 

* Under the system of Napoleon, which made civilization retrograde to this, 
as well as in most other particulars, the charges of collection in which must be 
included the charge of privation and the irrecoverable arrears, v/ere much more 
considerable; but the full extent of the mischief he caused is not yet ascertained. 

I Necker reckons the corvee at four millions of dollars only; "but probably he 
takes account of nothing, but the value the day-labour exacted; and does not no- 
tice the injury resulting from this method of supplying the public necessities. 
58 



458 ON CONSUMPTION. book m. 

3. Such as press impartially on all classes. 

Taxation being a burthen, must needs weigh lightest on each 
individual, when it bears upon all alike. When it presses inequi- 
tably upon one individual or branch of industry, it is an indirect, 
as well as a direct, incumbrance; for it prevents the particular 
branch or the individual from competing on even terms with the 
rest. An exemption, granted, to one manufacture, has often been 
the ruin of several others. Favour to one is most commonly injus- 
tice to all others. 

The partial assessment of taxation is no less prejudicial to the 
public revenue, than unjust to individual interests. Those who 
are too lightly taxed, are not likely to cry out for an increase; and 
those who are too heavily taxed, are seldom regular in their pay- 
ments. The public revenue suffers in both ways. 

It has been questioned whether it be just to tax that portion of 
revenues, which is spent on luxuries, more heavily than that spent 
on objects of necessity. It seems but reasonable to do so; for tax- 
ation is a sacrifice to the preservation of society and of social organ- 
ization, which ought not to be purchased by the destruction of in- 
dividuals. Yet, the privation of absolute necessaries implies the 
extinction of existence. It would be somewhat bold to maintain, 
that a parent is bound in justice to stint the food or clothing of his 
child, to furnish his contingent to the ostentatious splendour of a 
court, or the needless magnificence of public edifices. Where is 
the benefit of social institutions to an individual, whom they rob of 
an object of positive enjoyment or necessity in actual possession, 
and ofier nothing in return, but the participation in a remote and 
contingent good, which any man in his senses would reject with 
disdain? 

But how is the line to be drawn between necessaries and super- 
fluities? In this discrimination, there is the greatest difficulty, for 
the terms, necessaries and superfluities, convey no determinate or 
absolute notion, but always have reference to the time, the place, 
the age, and the condition of the party; so that, were it laid down 
as a general rule, to tax none but superfluities, there would be no 
knowing where to begin and where to stop. All that we certainly 
know IS, that the income of a person or a family may be so confined, 
as barely to suffice for existence; and may be augmented from that 
mmimum upwards by imperceptible gradation, till it embrace every 
gratification of sense, of luxury, or of vanity; each successive grati- 
fication being one step further removed from the limits of strict 
necessity, till at last the extreme of frivolity and caprice is arrived 
at; so that, if it be desired to tax individual income, in such manner 
as to press lighter, in proportion as that income approaches to the 
confines of bare necessity, taxation must not only be equitably ap- 
portioned, but must press on revenue with progressive gravity. 

_ In fact, supposing taxation to be exactly proportionate to indi- 
vidual income, a tax of ten per cent for instance, a family possessed 
of 60,000 dollars per annum would pay 6000 dollars in taxes, leav- 



CHAP. VIII. ON CONSUMPTION. 459 

ing a clear residue of 54,000 dollars for the family expenditure. 
With such an expenditure, the family could not only live in abun- 
dance, but could still enjoy a vast number of gratifications by no 
means essential to happiness. Whereas another family, with an 
income of 60 dollars, reduced by taxation to 54 dollars per annum, 
would, with our present habits of life, and ways of thinking, be 
stinted in the bare necessaries of subsistence. Thus, a tax merely 
proportionate to individual income would be far from equitable; 
and this is probably what Smith meant, by declaring it reasonable, 
that the rich man should contribute to the public expenses, not 
merely in proportion to the amount of his revenue, but even some- 
what more. For my part, I have no hesitation in going further, 
and saying, that taxation can not be equitable, unless its ratio is pro- 
gressive,* 

4. Such as are least injurious to reproduction. 

Of the values, whereof taxation deprives individuals, a great part 
would, undoubtedly, if left at the disposal of the individuals them- 
selves, have gone to the satisfaction of their wants and appetites; 
but some part would have been laid by, and have gone to the fur- 
ther accumulation of productive capital. Thus, all taxation may 
be said to injure reproduction, inasmuch as it prevents the accumu- 
lation of productive capital. 

This effect is more direct and serious, whenever the tax-payer is 
obliged to withdraw a part of the capital already embarked, for the 
purpose of enabling him to pay the tax; which case, as Sismondi 
has shrewdly observed, resembles the exaction of a tithe upon grain 
at seed-time, instead of harvest-time. Of this kind is the tax on 
legacies and successions. An heir, succeeding to a property of 
20,000 dollars, and called upon for a tax of 5 per cent upon it, will 
pay it, not out of his ordinary income, burthened as it is already with 
the ordinary taxes, but out of the inheritance, which is thereby re- 
duced to 19,000 dollars. Wherefore, if it happen to be a vested 
capital of 20,000 dollars, and be reduced by the tax to 19,000 
dollars, the national capital will be diminished to the amount of the 
1000 dollars thus diverted into the public exchequer. 

It is the same with all taxes upon the transfer of property. The 
owner of land worth 20,000 dollars, will get but 19,000 dollars for 
it, if the purchaser be saddled with a tax of 5 per cent. The seller 
will have a disposable capital of 19,000 dollars only, in lieu of land 
worth 20,000 dollars; and the national capital will sustain a loss of 
the difference. Should the purchaser be so bad an arithmetician, as 

* Wealth of Nations, book v. c. 2. It has been objected, that a progressive 
scale of taxation presents the disadvantage of operating as a penalty to deter 
activity and frugality from the accumulation of capital. But it must be obvi- 
ous, that taxation of all kinds subtracts a portion only, and generally a very 
moderate portion, of the addition made to the fortune of an individual; so that 
every one has a much stronger inducement to invite, than penalty to deter, ac- 
cumulation. If a person had to pay 40 dollars more in taxes, upotievery addition 
of 200 dollars to his revenue, still he would multiply his enjoyments in a larger 
ratio than his sacrifices. Vide what is said in Sect. 4. of the same Chapter, on 
the subject of the land-tax of England. Ibid. 



460 ON CONSUMPTION. 



BOOK III. 



to pay the full value of the land, without allowing for the tax, he 
will sacrifice a capital of 21,000 dollars in the purchase of value to 
the amount of but 20,000 dollars. In either case, the loss to the 
national capital will be the same; although, in the latter, it will fall 
upon the purchaser instead of the seller. 

Taxes upon transfer, besides the mischief of pressing upon capital, 
are a clog to the circulation of property. But, has the public any 
interest in its free circulation? So long as the object is in existence, 
is It not as well placed in one hand as in another.? Certainly not. 
1 he public has a perpetual interest in the utmost possible freedom 
ol Its circulation; because by that means it is most likely to get into 
the hands of those, that can make the most of it. Why does one 
man sell his land? but because he thinks he can lay out the value to 
more advantage in some channel of productive industry. And why 
does another buy it? but because he wishes to invest a capital, that 
is lying idle, or less productively vested; or because he thinks it 
capable of improvement. The transfer tends to augment the national 
income, because it tends to augment the income of the two contract- 
ing parties. If they be deterred by the expenses of the transfer, 
those expenses will have prevented this probable increase of the 
national income. 

Such taxes, however, as encroach upon the productive capital of 
the community, and, consequently, abridge the demand for labour 
and the profits of industry within the community, possess, in a very 
high degree, one quality, which that distinguished political econo- 
mist, Arthur Young, has pronounced to be an essential requisite in 
taxation, namely, the facility and cheapness of collection?* Since 
taxation presents at best but a choice of evils, a nation, heavily 
burthened, will probably do well, in submitting to a moderate im- 
post upon capital. 

Taxes upon law-proceedings, and, generally, all that is paid to 
law officers and agents, are taxes upon capital.(l) For litigation is 

rpJiJSJLif /^'^'^^'°"' "^'^J- '} ^'^' ''^^" ^"""'^ practicable to raise the duty on 
El ?A '*' rtn'^u ^^Sh scale. Were it reduced, the product to the ex- 

of XateTfreed^om of '^- ^^^q"^"y ^^eat; and the nation 'woulJ enjoy the benefit 
Us capUal. circulation, besides experiencing less encroachment upon 

(1) Taxes upon law proceedings are the most grievous and oppressive that 
have ever been resorted to, and since the appearancfe of Mr. Benth Jm's worl on 

FHh.i h' R° ""'' ^^', ^^' ^'"^ ''' ^^" ^""l^^ their impolicy. It is said^in the 
Edinburgh Review, (vol. 27, page 358) " that one dav Mr. Rose, in Mr. Pitt's 

~hS thatt-'"'"*'™'"'^' ^"' *"^°^™^d him that they'llX'adth 
?hS K reasoning was unanswerable-and that it was resolved there 

vLwer » ZT" T^ T''-\ ■'^'' ^""^Set after Budget," remarks the re! 
Mr P It him! u ^'''' '7™'^' '"^ ^hich those duties hive made a part; and 
All'thP L™ .'''^' T^ to patronize them upon his return to office in 1804." 
havP h Jn^t l'\'/ ^''."^^* ^""'"^^'^ ^" ^"PPO'-' «f this objectionable impost, 

?nlhe same RTvir"7/'^f "'^ ^^ ^l' ^^"^^am, in this work, which it is^said 
and for pflli J- ^ll «V°'^"^'^ °^ reasoning, has not perhaps been equalled, 

and tor excellence of style, has certainly never been surpassed." ^ 

American Editor. 



CHAP. VIII. ON CONSUMPTION. 46J 

not proportionate to the income of the suitors, hut to accident, to 
the complexity of family interests, and to the imperfections of the 
law itself 

Forfeitures are equally a tax on capital. 

The influence of taxation upon production is not confined to the 
circumstance of diminishing one of its sources, that is to say, capital; 
it operates besides in the nature of a penalty, inflicted upon certain 
branches of production and consumption. Patents, licenses to fol- 
low any specified calling, and, generally, all taxes, that bear directly 
upon industry, are liable to this objection; but, when moderate in 
their ratio, industry will contrive to surmount such obstacles with- 
out much difficulty. 

Nor is industry affected only by taxes bearing directly upon it; 
it is indirectly affected by such also, as bear upon the consumption 
of the articles it has to work upon. 

The products consumed in reproduction are, for the most part, 
those of primary necessity; and taxes, that discourage such products, 
must be injurious to reproduction. This is more especially the case 
in respect to those raw materials of manufacture, which can only be 
consumed reproductively. An excessive duty upon cotton, checks 
the production of all articles, wherein that substance is worked up.* 

Brazil is a country abounding in animal productions, that might 
be cured and exported, if they were allowed to be salted. Its 
fisheries are very productive, and cattle so abundant, that they are 
killed merely for the sake of the hide. Indeed, it is thence that 
our tanneries in Europe are in a great measure supplied. But the 
salt duties prevent the export of either fisii or meat; and thus, for 
the sake of a revenue of about 200,000 dollars, perhaps incalculable 
mischief is done to the productive powers of the country, as well 
as to the public revenue, which they might be made to yield. 

In like manner, as taxation operates in the nature of a penalty, to 
discourage reproductive consumption, it may be employed to check 
consumption of an unproductive kind; in which case, it has the 
two-fold advantage, of subtracting no value from reproductive in- 
vestment, and of rescuing values from unproductive consumption, 
to be employed in a manner more beneficial to the community. 
This is the advantage of all taxes upon luxuries.! 

* In both England and France, premiums are given upon the importation of 
specific raw materials, with a view to encourage manufacture. This is an error 
on the opposite side. Upon this principle, instead of a tax on the product of 
land, a bounty should be given to all who would take the trouble to cultivate; 
for domestic agricuhure furnishes the raw material of most manufactures; as 
grain in particular, which is transformed, through the mediation of human ex- 
ertion, into value of various kinds, exceeding that consumed in the process. 
Customs or duties of import upon any article whatever are equally equitable 
with direct taxes upon land; both are positive evils; but the lighter the tax, the 
smaller the injury. 

t When it is absolutely necessary to lay a tax on a particular kind of con- 
sumption or industry, which it is desirable not to extinguish altogetlier, the bur- 
then must be light in the commencement, and increased gradually and cautious- 
ly. But if it be desired to repress or annihilate a mischievous class of con- 



402 ON CONSUMPTION. bookiii. 

When sums, levied by taxation upon capital, instead of being 
simply expended by the government, are laid out upon productive 
objects; or, when individuals contrive to make good the deficiency 
out of their private savings, the positive mischief of taxation is then 
balanced by a counteracting benefit. The proceeds of taxation are 
reproductively vested, when laid out in improving the internal com- 
munications, constructing harbours, or other such works'of utility. 
Governments sometimes employ a part of the revenue thus realized 
in adventures of industry. Colbert did so, when he made advances 
to the manufacturers of Lyons. The governments of Hamburgh, 
and of some other places in Germany, were in the habit of embark- 
ing their revenues in productive undertakings; and it is said, that 
the authorities of Berne were in the habit of so employing a part of 
its revenues every year: but such instances are of very rare occur- 
rence. 

5. Such as are rather favourable than otherwise to the national 
morality; that is to say, to the prevalence of habits, useful and bene- 
ficial to society. 

Taxation influences the habits of a nation, in the same way as it 
operates upon its production and consumption, that is, by imposing 
a pecuniary penalty upon specified acts; and it is, moreover, pos- 
sessed of the grand requisites to render punishment effectual; 
namely, moderation and difficulty of evasion. * Without reference, 
therefore, to the purposes of finance and revenue, it is a power- 
ful engine in the hands of government, for either corrupting or 
reforming the national morals, and may be directed to the promotion 
of idleness or industry, extravagance or economy. 

The tax of five per cent upon all lands devoted to productive 
husbandry, and the exemption of pleasure-grounds, which existed in 
France before the revolution, operated, of course, as a premium upon 
luxury, and a penalty upon agricultural enterprise. 

The tax of one per cent upon the redemption of ground-rents and 
rent-charges was virtually a penalty upon an act, equally advantage- 
ous to the parties and to the community at large; a fine upon the 
meritorious exertions of prudent land owners to pay off their incum- 
brances. 

The law of Napoleon, exacting from each scholar, educated in a 
private academy, a specified payment into the chests of the public 
universities, operated as a penalty upon that mode of education, 
which alone can soften national manners and fully develope the 
faculties of the human mind.t 

sumption or industry, the full weight of the tax should be thrown upon it at 
once. 

* The efficacy of the characteristics of punishment has been placed beyond 
all doubt by Beccaria in his tract, Dei delitti e dellepene. 

f This species of tax is still more iniquitous, because it must fall either upon 
orphans, or upon parents, who are disposed to submit to personal privations, for 
the purpose of rearing valuable citizens; because it is heavier in proportion to 
the number of children, and the degree of privation of the parent; and because it 
is disproportionate to the means of the individual, poor and rich being taxed alike. 



CHAP. VIII. ON CONSUMPTION. 453 

When a government derives a profit from the licensing of lotteries 
and gambhng-houses, what does it else but offer a premium to a vice 
most fatal to domestic happiness, and destructive of national pros- 
perity? How disgraceful is it, to see a government thus acting as 
the pander of irregular desires, and imitating the fraudulent conduct 
It punishes in others, by holding out to want and avarice the bait of 
hollow and deceitful chance!* 

On the contrary, taxes, that check and confine the excesses of 
vanity and vice, besides yielding a revenue to the state, operate as 
a means of prevention. Humboldt mentions a tax upon cock-fight- 
ing, which yields to the Mexican government 45,000 dollars per 
annum, and has the further advantage of checking that cruel and 
barbarous diversion. 

Exorbitant or inequitable taxation promotes fraud, falsehood, and 
perjury. Well-meaning persons are presented with the distressing 
alternative, of violating truth, or sacrificing their interests in favour 
of less scrupulous fellow-citizens. They can not but feel involun- 
tary disgust, at seeing acts, in themselves innocent, and sometimes 
even useful and meritorious, branded with the name, and subjected 
to all the consequences, of criminality. 

These are the principal rules, by which present or future taxa- 
tion must be weighed, with a view to the public prosperity. After 
these general remarks, which are applicable to taxation in all its 

A parent of moderate fortune, with one son only, pays as much to the universi- 
ty as all the rest of his taxes together: if he have more sons than one, he is still 
worse off. Thus vi^as this institution converted by the usurper into an instru- 
ment of fiscal extortion, sufficient of itself to have insured the relapse into bar- 
barism, even had it never been made the medium of instilling false ideas or hab- 
its of servility. The pretext, of making the profits of private establishments 
contribute to the expense of compulsory tuition, is by no means satisfactory. 
Supposing the tuition of the public Lycecs to be, of all others, the best calculated 
to train up useful citizens; and, admitting the justice of compelling a father, or 
a teacher to his choice, to bring his pupil to the lectures of the authorized pro- 
fessors, still the parties, least in need of this instruction, are those already plac- 
ed in private establishments of education, and entrusted to teachers of their own 
selection. It may be for the interest of the community at large, to dispense par- 
ticular classes of learning gratuitously; but it is the grossest oppression to force 
learning upon individuals, and make them pay dear for it into the bargain. If 
any one class in particular ought to defray the charge of moderate gratuitous 
tuition, it is that, which has no children of its own, and is in the perception of 
all the benefits of social life, without being subject to all its burthens. 

* Lotteries and games of hazard, besides occupying capital unprofitably, in- 
volve the waste of a vast deal of time, that might be turned to useful account; 
and this item of expenditure can never redound to the profit of the exchequer. 
They have the further mischievous effect of accustoming mankind to look to 
chance alone for what their own talents or enterprize might attain; and to seek 
for personal gain, rather in the loss of others, than in the original sources of 
wealth. The reward of active energy appears paltry beside the bait of a capi- 
tal prize. Moreover, lotteries are a sort of tax, that, however voluntarily in- 
curred, falls alniost wholly upon the necessitous; for nothing, but the pressure 
of want can. ^rive mankind to adventure, with the chances manifestly against 
them. The sums thus embarked are for the most part, the portion of misery; 
or, what is worse, the fruit of actual crime. » 



464 ON CONSUMPTION. book hi. 

branches, it may be useful to examine the various modes of assess- 
ment; in other words, the methods adopted for procuring money 
from the subject; as well as to inquire, upon what classes of the 
community the burthen principally fails. 



Section II. 



^ 



Of the different Modes of Jissessment, and the Classes they 
press upon respectively. 

Taxation, as we have seen above, is a requisition by the govern- 
ment upon its subjects for a portion of their products, or of their 
value. It is the business of the political economist to explain the 
effects resulting from the nature of the products put in requisition, 
and from the mode of apportioning the burthen, as well as upon 
whom the burthen of the charge really falls, since it must inevitably 
fall upon some one or other. The application of the above principles 
in a few specific instances will show, how they may be applied in 
all others. 

The public authority levies the values taken in the way of taxa- 
tion, sometimes in the shape of money, sometimes in kind, accord- 
ing to its own wants, or the ability of the tax-payer. In whatever 
shape it is paid, the actual contribution of the tax-payer is always 
of the value of the article he gives. If the government, wanting or 
pretending to want corn, or leather, or woollens, makes a requisi- 
tion of those articles upon the tax-payer, and obliges him to furnish 
them in kind, the tax paid amounts exactly to what the payer has 
expended in procuring those articles, or what he could have sold 
them for, if the government had not taken them from him. This 
is the only way of ascertaining the amount of the tax, whatever 
price or rate the government may set upon it in the plenitude 
of its power. 

So, likewise, the charges of collection, in whatever shape they 
may appear, are always an aggravation of the assessment, whether 
they accrue to the profit of the state or not. If the tax-payer be 
obliged to lose his time, or transport his goods, for the purpose of 
paying the tax, the whole of the time lost, or expense of transport, 
is an aggravation of the tax. 

Among the contributions, that a government exacts from its sub- 
jects, should likewise be comprised, all the expenses which its poli- 
tical conduct may bring upon the nation. Thus, in estimating the 
expenses of war, we must include the value of equipment and 
pocket-money, with which the military are supplied by them- 
selves or their families; the value of the time lost by the militia; 
the sums paid for exemption and substitutes; the full charge of 
quarters for the troops; the pillage and destruction th|y may be 
guilty of; the presents and attentions lavished on them by friends 
or countrymen on their return; to all which must be added, the 



CHAP. vm. ON CONSUMPTION. 465 

alms extorted from pity and compassion by the misery consequent 
upon such misrule. For, in fact, none of these values need have been 
taken from the members of the community under a better system 
of government. And, although none of them have gone into the 
treasury of the monarch, yet have they been paid by the people, 
and their amount is as completely lost, as if they had contributed 
to the happiness of the human species. 

Hence, we may form some notion of the extent of the national 

sacrifices. But, from what source are they drawn? Doubtless, 

either from the annual product of the national industry, land, and 
capital; that is to say, from the national revenue; or from the values 
previously saved and accumulated; that is to say, from the national 
capital. 

When taxation is moderate, the subject can not only pay his 
taxes wholly out of his revenue, but will not be altogether disabled 
from besides saving some part of that revenue: and although some 
of the tax-payers may be obliged to trench upon their capital for 
the payment of their taxes, the loss to the general stock is amply 
reimbursed by the savings, which this happy state of affairs allows 
others to effect. 

But it is far otherwise, when military despotism or usurped au- 
thority extorts excessive contributions. Great part of the taxes 
is then taken from the vested and accumulated capital; and, if the 
country be long subjected to its domination, the revenues of each 
successive year are progressively reduced, and the ruin and depopu- 
lation of the country, will recoil upon its rulers, unless their down- 
fal be accelerated by their own folly and excesses. 

Under the protecting influence of just and regular government, 
on the contrary, there is a progressive annual enlargement of the 
profits and revenues, on which taxation is to be levied; and that 
taxation, without any alteration of its ratio, gradually becomes more 
productive by the mere multiplication of taxable products. 

Nor is the government more deeply interested in moderating the 
ratio of taxation, than in its impartial assessment upon every class of 
individual revenue, and its equal pressure upon all. In fact, when 
revenue is partially- affected, taxation sooner reaches the extreme 
limits of the ability of some classes, while others are scarcely touched 
at all: it becomes vexatious and destructive, before it arrives at the 
highest practicable ratio. The burthen is galling, not because of its 
weight, but because it does not rest upon all shoulders alike. 

The differeift methods employed to reach individual revenues, 
may be classed under two grand divisions — direct, and indirect, 
taxation; the former is the absolute demand of a specific portion of 
an individual's real or supposed revenue; the latter, a demand of a 
specific sum on each act of consumption of certain specified objects, 
to which that income may be applied. 

In neither case, is the real subject of taxation that commodity, on 
which the estimate .is made, and which forms the ground-work of 
the demand for the tax; or of necessity that value, whereof a part is 
59 



466 ON CONSUMPTION. book iii. 

taken by the state; individual revenue is the only real subject of tax- 
ation; and the specific commodity is selected only as a more or less 
effective means of discovering and attacking that revenue. If indi- 
vidual honesty could in ever}^ case be relied on, the matter vv^ould be 
simple enough; all that Avould be requisite would be, to ask each 
person the amount of his annual profits, that is to say, his annual reve- 
nue. The contingent of each would be readily settled, and one tax 
only necessary, which would be at the same time the most equitable, 
and the cheapest in the collection. This was the method adopted at 
Hamburgh, before that city fell into misfortune; but it can never be 
practised, except in a republic of small extent, and very moderately 
► taxed. 

As a means of assessing direct taxation proportionately to the 
respective revenues of the tax-payers, governments sometimes com- 
pel the production of leases by landlords, or, where there is no lease, 
set a value on the land, and demand a certain proportion of that value 
from the proprietor; this is called a land-tax.* Sometimes thej 
estimate the revenue by the rent of the habitation, and the numbei 
of servants, horses, and carriages kept, and make the assessmeni 
accordingly. This is called in France, the tax on moveables.t 
Sometimes they calculate the profits of each person's profession or 
calling, by the extent of the population and district where it is fol- 
lowed. This is called in France, the license-tax. J All these difier- 
ent modes of assessment are expedients of direct taxation. 

In the assessment of indirect taxation, and such as is intended to 
bear upon specific classes of consumption, the object itself is alone 
attended to, without I'egard to the party who may incur the charge. 
Sometimes a portion of the value of the specific product is demanded 
at the time of production; as in France, in the article of salt. Some- 
times the demand is made on entry, either into the state, as in the 
duties of import;§ or into the towns only, as in the duties of entry. || 
Sometimes a tax is demanded of the consumer at the moment of 
transfer to him from the last producer; as in the case of the stamp 
duty in England, and the duty on theatrical tickets in France. 
Sometimes the government requires a commodity to bear a particular 
mark, for which it makes a charge, as in the case of the assay-mark 
of silver, and stamp on newspapers. Sometimes it monopolizes the 
manufacture of a particular article, or the performance of a particular 
kind of business; as in the monopoly of tobacco, and the postage of 
letters. Sometimes, instead of charging the commodity itself, it 
charges the payment of its price; as in the case of stamps on receipts 
and mercantile paper. All these are difierent ways of raising a reve- 
nue by indirect taxation; for the demand is not made- on any person 
in particular, but attaches upon the product or article taxed.lF 

* Contribution-fonciere — f rhohiUere, 

X Les Fatentes. § Douanes. \\ Octroi. 

Tf Not because they affect the tax-payer indirectly; for this circumstance is 
equally applicable to many items of direct taxation; as, for instance, to the license- 
tax {patentes,) part of which falls indirectly upon the consumer, who buys of 
the licensed dealer. 



CHAP. viir. ON CONSUMPTION. 467 

It may easily be conceived, that a class of revenue, which may 
escape one of these taxes, will be affected by another; and that the 
multiplicity of the forms of taxation gives a great approximation to 
its equal distribution; provided always, that all are kept within the 
bounds of moderation. 

Every one of these modes of assessment has peculiar advantages 
and peculiar disadvantages, besides the general evil of all taxation, to 
wit, that of appropriating a part of the products of the community 
to purposes little conducive to its happiness and reproductive powers. 
Direct taxation, for instance, is cheap in the collection; but, on the 
other hand, it is paid with reluctance, and must be enforced with con- 
siderable harshness and rigour. Besides, it bears very inequitably 
upon the individual. A rich merchant, charged only 120 dollars for 
his license, makes an annual profit, perhaps, of 20,000 dollars; while 
the retailer, who can scarcely be supposed to make more than 300 dol- 
lars, is charged for his license 20 dollars, which is the lowest rate. 
The revenue of the landholder is already affected by the land-tax, 
before it is further reduced by the tax on moveables; while the 
capitalist is subjected to the latter burthen only. 

Indirect taxation has the recommendation of being levyable with 
more ease, and with less apparent vexation or hardship. All taxes 
are paid with reluctance, because the equivalent to be expected for 
them, that is, the security afforded by good oi'der and government, 
is a negative benefit, which does not immediately interest inditri- 
duals; for the benefit afforded consists rather in prevention of ill, 
than in the diffusion of good. But the buyer of the taxed commo- 
dity does not suspect himself to be paying for the protection of 
government, which probably he cares very little about; but merely 
for the commodity itself, \vhich is an object of his urgent desire, 
although, in fact, that price is aggravated by the tax. M'lie induce- 
ment to consume is strong enough to include the demand of the 
government; and he readily parts with a value, that procures an 
immediate gratification. 

It is this circumstance, that makes such taxes appear to be volun- 
tary. And, indeed, se jnuch so were they considered by the United 
States before their emancipation, that, although the right of the 
British Parliament to tax America without her consent was stoutly 
denied, yet she was ready to acknowledge the right of imposing 
taxes upon consumption, which every body could evade if he 
pleased, by abstaining from the articles 'taxed.* Personal taxes are 

* Fide Examination of B. Franklin, at the bar of the House of Commons, 
1766. Memoirs, vol. i. Appendix 6. (a) 



(a) The denial went to the whole of what is called internal taxation; the ad- 
mission, which appears on tlie part of the American agents to havo been a con- 
cession for the sake of peace, went no farther than to external taxes for the reg- 
ulation of trade. And even this concession on the part of some of the agentg 
was very soon retracted, and the right of taxation denied in ioto. Ibid. vol. i. 
passim. T. 



468 ON CONSUMPTION. book hi. 

viewed in a different light, and have more of the character of osten- 
sible spoliation. 

Indirect taxation is levied piecemeal, and paid by individuals 
according to their respective ability at the moment. It involves 
none of the perplexity of separate assessments on each province, 
department, or individual; or of the inquisitorial inspection into 
private circumstances; nor does it make one person suffer for the 
default of another. The inconvenience of appeals and private ani- 
mosities, as w^ell as of levy by distress or imprisonment, is avoided 
altogether. 

Another advantage of indirect taxation is, that it enables the 
government to bias the different classes of consumption; favouring 
such as promote the public prosperity, as does reproductive con*^ 
sumption of all kinds; and checking such as tend to public impo- 
verishment, as do all kinds of unproductive consumption; discour- 
aging the costly and insipid indulgences of the wealthy, and 
promoting the simpler and cheaper enjoyments of the poor and 
industrious. 

It has been objected to indirect taxation, that it entails a heavy 
expense of collection and management, and a large establishment 
of clerks, officers, directors, and subordinate agents; but it is ob- 
servable, that these charges may be vastly reduced by good admin- 
istration. The excise and stamp-duties in England cost but 3i 
p^r cent, in the collection in the. year 1799.* There are few 
classes of direct taxation, that are managed so economically in 
France. 

It has been further objected, 'that its product is uncertain and 
fluctuating; whereas, the public exigencies require a regular and 
certain supply: but there has never 'been any lack of bidders, 
whenever such taxes have been let out to farm; and experience has 
shown, that the product of every class of taxation may always be 
nearly estimated and safely reckoned upon, except in very rare and 
extraordinary emergencies. Besides, taxes on consumption are 
r^eccessarily various; so tliat, the deficit of one is covered by the 
surplus of another. 

Indirect taxation is, however, an incentive to fraud, and obliges 
governments to brand with the character of guilt, actions that are 
innocent in their nature; and, consequently, to resort to a distress- 
ing severity of punishment. But this mischief is never consider- 
able, until taxation has grown excessive, so as to make the temptation 
to fraud counterbalance the danger incurred. All excess of taxation 
IS attended with this evil; that, without enlarging the receipts of 
the public purse, it multiplies the sufferings of the population. 

It may be observed, that consumption, and, consequently, indivi- 
dual revenue, are unequally affected by indirect, as well as by direct, 
taxation: for the private consumption of many articles is not pro- 

* Gamier, Traduction de Smith, torn. iv. p. 438. According to Arthur Younff, 
the stamp-duties in his time cost but 5,691/. in the collection, upon the receipt 
ot 1,.130,000/.; which is less than 1-2 percent. 



CHAP. VIII. ON CONSUMPTION. 469 

portionate to the revenue of the consumer. The possessor of an 
annual revenue of 20,000 dollars does not consume in the year an 
hundred times as much salt, as the possessor of a revenue of 200 
dollars only. But this inequality may be obviated by the variety 
of taxes on consumption. Moreover, it is to be recollected, that 
such taxes fall upon incomes already charged with the taxes on 
land and on moveables. A person, whose whole income is derived 
from land, in respect to which he is taxed in the first instance, pays 
on the same income a second tax under the head of moveables; and 
a third on every taxed article, that he buys and consumes. 

Although all these kinds of taxes be paid in the outset, by the 
persons of whom they are demanded by the public authority, it 
would be wrong to suppose, that they always ultimately fall on the 
original payers, who, in many instances, are not the parties really 
charged, but merely adA-ance the tax in the first instance, and con- 
trive to get indemnified wholly or partially by the consumers of 
their own peculiar products. But the rate of indemnity is infinitely 
diversified by the respective circumstances of the indivicluals. 

Of this diversity, we may form some notion, by the consideration 
of the following general facts: 

When the taxation of the producers of a specific commodity ope- 
rates to raise its price, part of the tax is paid by the consumers of 
the commodity. If its price be nowise raised, it falls wholly upon 
the producers. If the commodity, instead of being thereby ad- 
vanced in price, is deterioi-ated in quality, a portion of the tax at 
least must fall upon the consumer; for a purchase of inferior quality 
at equal price is equivalent to a purchase of equal quality and superior 
price. 

Every addition to price must needs reduce the number of those 
possessed of the ability to purchase; or, at any rate, must diminish 
the extent of that ability.* There is much less salt consumed, when 
it sells for three cents, than when it sells for one cent per lb. Now, 
the ratio of the demand to the means of production being lowered, 
productive agency in this department is worse paid; that is to say, 
the master-manufiicturer of salt, and all the subordinate agents and 
labourers, together with the capitalists, that supplies the funds, and 
the landlord of the premises- where the concern is carried on, must 
he content with smaller profits, because their product is less in de- 
mand. t The productive classes, indeed, naturally strive to indemnify 

* Supra, Book II. chap. I. 

f The position, that the interest of the capitalist and the rent of the landlord 
are thereby lowered, however paradoxical it may appear, is nevertheless quite 
true. It may be asked, wliy should the capitalist, who makes the advance to 
the manufacturer, or the landlord, whose land lie occupies, lower their demands, 
in consequence of a portion of the product beiny subtracted by taxation? But 
is no allowance to be made for consequent delay of payment, claims of allow- 
ances, failures, and legal expenses? All, or at least a portion, of which must 
fall upon the landlord and capitalist: and often without any suspicion on their 
part, that they are thus made to participate in the burthen. In a complex aocial 
organization, the pressure of taxation is often imperceptible. 



470 ON CONSUMPTION. book 



themselves to the amount of the tax; but, they can never succeed 
the full extent, because the intrinsic value of the commodity, that, . 
mean, which goes to pay the charges of production, is really dimin- 
ished. So that, in fact, the tax upon an article never raises its total 
price by the full amount of the tax; because, to do so, the total 
demand must remain the same; which it never can do. Wherefore, 
in such cases, the tax falls, partly upon those, who still continue to 
consume, notwithstanding the increase of price, and partly upon the 
producers, who raise a less product, and find that, in consequence of 
the reduced demand, they really obtain less on the sale, when the 
tax comes to be deducted. The public revenue gains the whole 
excess of price to the consumer, and the whole of the profit, which 
the produce is thus compelled to resign. The effect is analogous to 
that of gunpowder, which at the same time propels the bullet, and 
makes the piece recoil. 

By laying a tax upon the consumption of woollens, their consunip- 
tion is reduced, and the revenue of the wool-grower suffers in con- 
sequence. It is true, he may take to a different kind of cultivation, 
but we may fairly suppose^ that, under all the circumstances of soil 
and situation, the rearing of sheep was the most profitable kind of 
culture; otherwise, he would not have chosen it. A change in the 
mode of cultivation must, therefore, involve a loss of revenue. Bu.t 
the clothier and the capitalist will each be subjected to a portion of 
the loss resulting from the tax. 

Each concurrent producer is affected by a tax on an article of 
consumption, in proportion only to the share he may have in raising 
the product taxed. 

When the owner of the soil furnishes the greatest part of the 
value of a product, as he does in respect to products consumed nearly 
io the primary state, he it is that bears the greatest part of that por- 
tion of the tax, which falls on the producers. A duty of entry upon 
the wine imported into the towns, falls heavily upon the wine- 
grower; but an exorbitant excise upon lace will affect the flax-grower 
in a degree hardly perceptible; whereas, all the other producers, the 
dealers, the operative and speculative manufacturers, who create 
the far greater proportion of the value of the lace, will suffer very 
severely. 

When the value of a product is partly of foreign, and partly of 
domestic creation, the domestic producers bear nearly the whole 
burthen of the tax. A tax upon cottons in France will reduce the 
earnings of her cotton manufacturers, by lowering the demand for 
their product; thus, part of the tax will fall on them. But the wages 
of the productive agency of tliQ cotton-growers in America will be 
very little affected indeed, unless there be a concurrence of other 
circumstances. In fact, the tax would reduce the consumption in 

_ This shows the danger of adherence to ftivariable principle; and of abandon- 
ing the experimental method of Smith, and constructing a system of theoretical 
deduction, as some recent English writers have done, in imitation of the econo- 
mists of the last century. 



dto I 
It, I I 



CHAP. VIII. ON COIN SUMPTION. 471 

France 10 per cent perhaps, and the demand in America 1 per cent 
only, if the demand from France were hut one-tenth of the general 
demand upon America. 

The taxation of an ohject of consumption, if it he one of primary 
necessity, operates upon the price of almost all other products, and 
consequently falls upon the revenues of all the other consumers. 
An octroi upon meat, corn, and fuel, at their entr)'' into a town, 
enhances the price of every thing manufactured in it; while a tax 
upon the tohacco there consumed makes no other commodity dearer; 
the producers and consumers of tobacco alone are affected; and for 
a very plain reason; the producer who indulges in superfluities has 
to maintain a competition with another, who abstains from them; 
but, if he pays a tax upon necessaries, he need fear no competition; 
for his neighbours will be all in the same predicament. 

The direct taxation of the productive classes must, a fortiori, 
affect the consumers of their products, but can never raise the prices 
of those products so much, as completely to indemnify the producer; 
because, as I have repeatedly explained, the increased price abridges 
the demand, and the contraction of the demand reduces the profits 
of all the productive agency, that has been exerted in the supply. 

Of the concurrent producers of a specific product, some can more 
easily evade the effect of the tax than others. The capitalist, whose 
capital is not absolutely vested and sunk in a particular business may 
withdraw it and transfer it elsewhere, from a concern that yields 
him a reduced interest, or has become more hazardous. The ad- 
venturer or master-manufacturer may, in many cases, liquidate his 
account, and transfer his labour and intelligence to some other 
quarter. Not so the land-owner and proprietor of fixed capital.* 
An acre of vineyard or corn land will only produce a given quantity 
of corn or wine, whatever be the ratio of taxation; which may take 
the h or even ^ of the net produce, or rent as it is called, and yet 
the land be tilled for the sake of the remaining \ or ^.t The rent, 
that is to say, the portion assigned to the proprietor, will be reduced, 
and that is all. The reason will be manifest to any one, who con- 
siders, that in the case supposed, the land continues to raise and 
supply the market with the same amount of produce as before; while 
on the other hand, the motives in which the demand originates 
remain just as they were.J If, then, the intensity of supply and 

* Vide Supra, Book I. chap. 4. for the explanation of the mode, in which the 
land-holdei concurs in production by the advance of his land; and must, there- 
fore, be included amonjrst the productive classes. 

f The cultivation need never be abandoned altogether," until taxation takes 
more than the whole surplus product applicable to the payment of rent; it is 
then worth nobody's while to cultivate at all; for not only could the proprietor 
receive nothing, the whole being appropriated by the state; but the farmer would 
be compelled to pay to the state a higher rent, than he could affgrd. 

j;. There is this peculiarity attending the products of agricultural industry; viz. 
that their average price is not raised by growing scarcity, because population is 
sure to decline co-extensively vath the declining supply of human aliment; so 
that the demand necessarily diminishes equally with the supply. Thus it is not 



472 ON CONSUMPTION. bookiii. 

demand must both remain the same, in spite of any increase or 
diminution of the ratio of the direct taxation upon the land, the 
price of the product supplied will likewise remain unchanged, and 
nothmg but a change of price can saddle the consumer with any 
portion whatever of that taxation.* 

Nor can the proprietor evade the tax even by the sale of the 
estate; for the price or purchase money will be calculated according 
to the revenue which may be left him by taxation. The purchaser 
makes his estimate according to the net revenue, charges and taxes 
deducted. If the ordinary interest on such investments of capital 
be five per cent, an estate, that before would have sold for 20,000 
dollars, will fetch but 16,000 dollars when it comes to be charged with 
an annual tax of 200 dollars; for its actual product to the proprietor 
will not exceed 800 dollars. The effect is precisely the same, as 
if government were to appropriate to itself 1-5 of the land in the 
country; which would make no difierence at all to the consumers 
of its produce.t 

But property in dwelling-houses is otherwise circumstanced; a 
tax upon the ownership raises the rents; for a house, or rather the 
satisfaction it yields to the occupier, is a product of manufacture and 
not of land; and the high rate of house-rent reduces the production 
and consumption of houses, in the. like n^anner as of cloth or any 
other manufactured commodity. Builders, finding their profits re- 
duced, will build less; and consumers, finding the accommodation 
dearer, will content themselves with inferior lodging. 

From all those circumstances, we may judge of ^the temerity of 
asserting as a general maxim, that taxation falls exclusively upon 
any specific class or classes of the community. It always falls upon 
those who can find no means of evasion; for every one naturally 
tries to shift the burthen off his own shoulders if possible; but the 
ability to evade it is infinitely varied, according to the various forms 

found, that wheat is dearer in those countries, where great part of the land is 
thrown out of tillage, than where it is all in a high state of cultivation. In 
Jspain, wheat is not now dearer, than in the time of Ferdinand and Isabella 
though It IS there produced in much less abundance; for the number of mouths 
to be fed is also much less. On the contrary, the lands of both Eno-land and 
Jrance were less cultivated in the middle ages than at the present day;°and their 
product of grain less abundant; yet it does not appear, from a comparison of 
other values, that it was then much dearer than at present. The product and 
the population were both greatly inferior; and the slackness of demand coun- 
terbalanced the slackness of supply. 

* ^V^^ mistake to suppose, that the tax must bear equally upon the proprie- 
tor and the farmer, who finds the requisite capital and industry; for taxation can 
have no effect, either in reducing the quantity of land capable of cultivation, or 
m niultiplying the number of farmers, able and willing to undertake it; and, if 
neither supply and demand in this branch be varied, the ratio of the rent must 
needs remain unaltered likewise. 

- t The Economists were quite correct in their position, that a land or territo- 
rial tax falls wholly upon the net product, and consequently, upon the proprie- 
tors; but they were wrong in extending the doctrine so far as to assert, that all 
other taxes were defrayed out of the same fund. 



CHAP. VIII. ON CONSUMPTION. 473 

of assessment, and the position of each individual ia the social 
system. Nay, more; it varies at different times even in the same 
channel of production. When a commodity is in great request, the 
holder will not part with the possession, unless indemnified for all 
his advances, of which the tax he has paid is a part: he will take 
nothing short of a full and com])lete indemnity. But, if any unlooked- 
for occurrence should happen to lower the demand for his product, 
he will be glad enough to take the tax upon himself, for the sake of 
quickening the sale. There are few things so unsteady and variable, 
as the ratio of the pressure of taxation upon each respective class of 
the community. Those writers, who have maintained, that it bears 
upon any one or more classes in particular, or in any fixed or cer- 
tain proportion, have found their theory contradicted by experience 
at every turn. 

Furthermore, the effects I have been describing, and which are 
equally consonant to experience and to reason, arc uniform in their 
operation and of equal duration with the causes in which they origi- 
nate. The owner of land will never be able to saddle the consumers 
of its produce with any part of his land-tax; not so the manufacturer. 
A manufactured commodity will invariably feel a diminution in its 
consumption, in consequence of the price being raised by taxation, 
supposing other circumstances to be stationary; and its production 
will be a less profitable occupation. A person, who is neither pro- 
ducer nor consumer of an object of luxury, will never bear any 
portion whatever of the tax that may be laid upon it. — What, then, 
must we think of a proposition, unfortunately sanctioned by the ap- 
probation of an illustrious body,"^ that has too much neglected this 
branch of science, namely, that it is of little importance whether a 
tax press upon one branch of revenue or another, provided it be of 
long standing; because every tax in the end affects every class of 
revenue, in like manner, as bleeding in the arm reduces the circu- 
lating blood of the whole human frame. The object of comparison 
has no analogy whatever with taxation. Social wealth is not a 
fluid, tending "constantly to find a level. It rather resembles the 
vegetable creation, which admits of the loss of a limb without the 
de.struction of the trunk, and in which the loss is more to be la- 
mented, if the branch be productive, than if it be barren.— But the 
tree will bear cutting and hacking in every part, before it becomes, 
barren all over, or necessarily falls into decay. This is a far more 
apposite case; but neither will do to reason upon. Comparisons are 
not proofs, but mere illustrations, tending to make that intelligible, 
which can be made out in proof without their assistance. 

When speaking of taxes upon products, which I have sometimes 
called taxes upon consumption, although not paid entirely in all 
cases by the consumer, I have hitherto made no mention of the 
particular stage of production, at which the tax may be demanded* 

* The French institute, which awarded the prize of merit to an Essay of 3/. 
Canard, in support of this doctrine. 
60 



474 ON CONSUMPTION. book 



ves I 



or of the consequence of this particular circumstance, which deserves 
a little of our attention. 

Products increase in value progressively, as they pass through the 
hands of the different concurrent producers: and even the most 
simple undergo a variety of modifications, before they arrive at a 
fit state for consumption. Wherefore, a tax does not take the pro- 
portion of the value of a product which it professes, unless it be 
levied at the precise moment, when it has arrived at the full value, 
and has undergone all the productive modifications. If a tax be im- 
posed, on the raw material in the outset, proportioned, not to its then 
value, but to the value it is about to receive, the producer, in whose 
hands it happens to be, is obliged to advance a tax out of proportion 
to the value in hand; which advance, besides being highly incon- 
venient to himself, is refunded with equal inconvenience by every 
successive producer, till it reach the hands of the last, who is in turn 
but partially indemnified by the consumer. And there is this further 
mischief in such an advance of tax; that it prevents the class of in- 
dustry, which is called upon to make it, from being originally set in 
motion, without a larger capital than the nature of the business 
requires; and that the additional interest of the capital, which must 
be paid, part by the consumers, and part by the producers, is so 
much additional taxation, without any addition of public revenue.* 

Thus, both theory and experience lead to the conclusion precisely 
opposite to that drawn by the sect of economists; and show that por- 
tion of the tax, which presses upon the consumer's revenue, to be 
always the more burthensome, the earlier it is levied in the process 
of production. 

Direct and personal taxes, which operate to raise the price pf 
necessaries, or such as fall immediately upon necessaries, are liable 
to this inconvenience in the highest degree: for they oblige each 
producer to advance the personal tax on all the producers that have 
preceded him: so that the same amount of capital will set in motion 
a smaller amount of industry; and the tax-payers pay the tax, plus 
a compound interest upon it, yielding no benefit to the exchequer. 

Nor is this mere theory: the neglect of thes-e principles has occa- 
sioned many serious practical errors; like that of the Constituent 

* The duty on the import of cotton into France was, in 1812, as high as 200 
dollars per bale, one bale with another. There were several manufactories ave- 
raging a consumption of two bales per day; and as the amount of duty was a 
dead outlay, during the whole interval between the purchase of the raw material 
and the realization of the manufactured product, which may be taken at twelve 
months, they must each have required an additional capital of 120,000 dollars 
more than would have been requisite but for the tax; the interest of which they 
must have charged to the consumer, or have paid out of their own profits. The 
whole of it was so much addition of price to the French consumer, and aggra- 
o vation of the pressure of taxation, unproductive of a single additional dollar to 
the public revenue. The heaviest of the national burthens of that period were 
those that made the least figure in the annual budget of the ministry: the people 
suffered, in very many instances, without knowing the nature of the grievance, 
as in the example, just cited. 



I 



CHAP. VIII. ON CONSUMPTION. 475 

Assembly of France, which carried to excess the S5'stem of direct 
taxation, especially upon land; being misled by the prevailing and 
fashionable doctrine of the economists; — that land is the source of 
all wealth, the agriculturist the only productive labourer, and France 
naturally and essentially an agricultural country. 

It seems to me that, in the present stage of political economy, the 
principles of taxation will be more correctly laid down as follows: 

Taxation is the taking a portion of the general product of the 
community, which never returns to the community in the channel 
of consumption. 

It takes from the community over and above the values actually 
brought into the exchequer, the charges of collection, and the per- 
sonal trouble it entails; together with all those values, of which it 
obstructs the creation. 

The privation resulting from taxation, whether voluntary or com- 
pulsory, affects the tax-payer in his quality of producer, whenever 
it operates to curtail his profits; that is to say, his income or reve- 
nue; and affects him in his character of consumer, whenever it 
increases his expenditure, by raising the prices of products. 

And, since an increase of expenditure is precisely the same thing 
as a diminution of revenue, whatever is taken by taxation may be 
said to be so much deducted from the revenues of the community. 

In a great majority of cases, the tax-payer is affected by taxation 
in both his characters, of producer and consumer; and, when he can 
not manage to pay the public burthens out of his revenue, along with 
his personal consumption, he must encroach upon his capital. When 
this encroachment of one person is not counterbalanced by the sav- 
ings of another, the wealth of the community must gradually decline. 
The individual actually paying the tax to the tax-gatherer is not 
always the party really charged with it, at least, not the party 
charo-ed with the whole that is paid. He frequently does no more 
than'kdvance the tax, either wholly or partially; being afterwards 
reimbursed by the other classes of the community, m a very com- 
plicated way, and perhaps after a vast variety of intermediate opera- 
tions; so that a great many persons are paying portions of the tax 
at a time when probably they least suspect it, either in the shape ot 
the advanced price of commodities, or of personal los.s, which they 
feel but can not account for. 

The individuals, on whose revenues the tax ultimately tails, are 
the real tax-payers, and contribute value greatly exceeding the sum 
that is brought into the exchequer, even with the addition ot the 
charges of collection. The misconduct of the government in the 
matter of taxation, is proportionate to this excess of the payment 

above the receipt. , . ,, i- 1 4. 

A country heavily taxed may be considered in the same light as 
one labouring under natural impediments to production. With a 
heavy charge^ of production, it raises a very small product. 1 er- 
sonal exertion, capital, and the productive agency of land, are all 



476 ON CONSUMPTION. book in. 

but poorly recompensed : and more is expended in earning a less 
profit. 

It is worth while on this head to recur to the principles explained 
in the preceding book,* when describing the difference between 
positive and relative dearness. High price resulting from taxation 
is positive dearness: it indicates a smaller product raised by the 
efforts of a larger amount of productive agency. Besides which, 
taxation generally occasions a cotemporary advance of commodi- 
ties in comparison with silver; that is to say, raises their money 
price: and for this reason; because specie is not an annual, regene- 
rative product, like those that are swallowed up by taxation. Gov- 
ernment is not a consumer of specie, except when it happens to 
export it for the payment of its armies, or foreign subsidies: it 
refunds in the purchases it makes all the specie it obtains by taxa- 
tion: but the value levied is never refunded.! Wherefore, since 
taxation paralyzes one part of the sources of production, and effects 
the rapid destruction of the product of the other, when its ratio is 
excessive, it must gradually render products more scarce in propor- 
tion to the specie, which is not varied in quantity by the operation. 
Now, whenever the commodities to be circulated become fewer in 
proportion to the specie that is to circulate them, their relative value 
to the specie must rise; the same money will purchase a smaller 
quantity of products. 

It might be supposed, that such a superabundance of gold and 
silver specie ought to operate in exoneration of the public: yet it 
can not have that effect; for, however plentiful it may be in pro- 
portion to other commodities, still individuals can only obtain it by 
giving their own products in exchange, and the raising of those pro- 
ducts has become more difficult and more costly. 

Besides, when money-prices grow high, and specie is conse- 
quently reduced iu relative value, it gradually takes its departure, 
and becomes scarcer, like all other commodities: and thus a country, 
burthened with a taxation too heavy for its productive powers, is 
first drained of its commodities, and next of its specie; till it gradu- 
ally reaches the extreme of penury and depopulation. 

The careful study of these pi'inciples will give some insight into 
the mode, in which the annual and really monstrous expenditure of 
national governments, in modern times, has habituated the subject 
to severer toil and exertion, without which it would be impossible 
that, after providing for the subsistence, comfort, and pleasures of 
himself and family, according to the habits of the time and place, he 
should be able to meet the consumption of the state, and the collate- 
ral waste and destruction it occasions, the amount of which it is 
impossible to ascertain, though in the larger states it is confessedly 
enormous. 

* Book II. chap. 3. 

t For the reason already stated, viz. that purchases, made with the proceeds 
of taxation, are acts of exchange, and not of restitution. 



CHAP. VIII. ON CONSUMPTION. 477 

This very profusion, though it proves the vices and defects of the 
poHtical system and organization, has been attended with one ad- 
vantage at any rate; it has operated to stimulate the approxima- 
tion to perfection in the art of production, by obliging mankind to 
turn the natural agents, to better account. In this point of view, 
taxation has certainly helped to develope and enlarge the human 
faculties; so that, when the progress of political science shall limit 
taxation to the supply of real public wants only, the improvements 
in the art of production will prove a vast accession to human happi- 
ness. But, should the abuses and complexity of tiie political system 
lead to the prevalence, extension, increase, and consolidation of 
oppressive and disproportionate taxation, it is much to be feared, that 
it may plunge again into barbarism those nations, whose productive 
powers are now the most astonishing; and the condition of the 
labouring classes, who are always the bulk of the community, may 
in such nations present a picture of drudgery so incessant and toil- 
some, as to make them cast a wistful eye upon the liberty of savage 
existence; which, though it offer no prospect of domestic comfort, 
at least promises emancipation from perpetual exertion to supply the 
prodigality of a public expenditure, yielding to them no satisfaction, 
and, perhaps, even operating to their prejudice.(«) 



Section III. 

Of Taxation in Kind. 

Taxation in kind is the specific and immediate appropriation of 
a portion of the gross product to the public service. 

It has this advantage, of calling on the producer only for what he 

(a) This ground of apprehension is certainly just. It has been doubted by 
many political theorists, whether the total remission of taxation would operate 
to improve the condition of the inferior productive classes: inasmuch, as all that 
is now paid into the public exchequer, would quickly be appropriated by the 
classes, who should happen to be in possession of those sources and means 
of production, which are capable of exclusive appropriation; and the owners of 
mere personal agency would nowise benefit. But it should be observed, that private 
persons have an immediate personal interest in making the most of their property; 
and will, on their own account, so conduct themselves, as to promote their own 
advantage, which is the advantage of the public also, where equality of personal 
right prevails. Wherefore, the strongest impulse of private cupidity c;m never 
operate to retard the advance of productive power and national wealth, or to 
make them retrograde, but just the contrary. Thus, although the present con- 
dition of the mere labourer might not be improved, his means of bettering his 
condition would be enlarged, by the growing increase of wealth, and by greater 
freedom of personal agency. The extortion of private cupidity, unaided by 
authority, must, for its own sake, regulate itself by the ability of the object of 
it: but that of public authority is inexorable, and is restrained by no considera- 
tion of immediate personal interest. Besides, personal suffering, occasioned by 
the hard-heartedness of primate task-masters, is not so strong an incentive of 
odium against public authority, as where that authority is itself the ostensible 
task-master. T. 



■ 

II. I 



478 ON CONSUMPTION. book lif. 

has actually in hand, in the identical shape which it happens to be 
under. Belgium, after its conquer,t by France, found itself at times 
unable to pay its taxes, in spite of abundant crops; the war, and the 
prohibition of exportation, obstructed the sale of its produce, which 
the government enforced by demanding payment in money; whereas, 
the taxes might have been collected without difficulty, had the 
government been content to take payment in kind. 

It has the further advantage of making it equally the interest of 
government and of the farmer to obtain plentiful crops, and improve 
the national agriculture. The levying of taxes in kind in China, was 
probably the origin of the peculiar encouragement, bestowed by its 
government upon the agricultural branch of production. But, why 
favour one branch, when all are equally entitled to protection, be- 
cause all contribute to bear the public burthens? And, why has not 
government an equal interest in supporting the other branches, 
which it takes the trouble of extinguishing? 

_ It has likewise the advantage of excluding all exaction and injus- 
tice m the collection; the individual, when he gathers in his harvest, 
knows exactly what he has to pay; and the state knows what it has 
to receive. 

This tax, which might appear at first sight to be of all others the 
most equitable, is nevertheless, of all others the most inequitable; for 
it makes no allowance for the advances made in the course of pro- 
duction, but is taken upon the gross, instead of the net, product. 
Take two farmers in different branches of cultivation; the one farm- 
ing tillage-land of moderate quality; his expenses of cultivation, 
amounting, one year with another, say to 160 dollars, and the gross 
product of his farm, say to 2400 dollars, so as to yield him a net pro- 
duct of 800 dollars only; the other farming pasturage or wood-land, 
yielding a gross product of precisely the same amount of 2400 dol- 
lars; with an expense of cultivation, amounting, perhaps, to but 400 
dollars, leaving him a net product, one year with another, of 2000 
dollars. Suppose a tax in kind to be imposed in the ratio of 1-12 of 
the annual product of land of all descriptions indiscriminately. The 
former will have to pay in sheaves of corn to the amount of 200 dollars: 
the latter will pay, in cattle or in wood, an equal value of 200 dol- 
lars. What is the result? The one will have paid the fourth part 
of a net revenue of 800 dollars; the other but the tenth part of a net 
revenue of 2000 dollars. 

The revenue, that each person has for his own share, is the net 
residue only after replacing the capital he has embarked, whatever 
may be its amount. Is the gross amount of the sales he effects in 
the year the annual income of the merchant? Certainly not; all 
the income he gets is the surplus of his receipts above his ad- 
vances; on this surplus alone can he pay taxes, without ruin to his 
concerns. 

The ecclesiastical tithe levied in France under the old system 
was liable to this inconvenience is part only. It attached neither 
upon meadow, nor wood-land, nor kitchen ground, nor many other 



CHAP. VIII. ON CONSUMPTION. 479 

kinds of cultivation; and in some places was 1-1 S, in others 1-15 
or 1-10 of the gross product; so that the real, was corrected by the 
apparent inequality. 

The marechal de Vauban, in his work entitled, Dixhne Royale, a 
book replete with just views, and well worth the study of those 
who manage national finances, proposes a tax of 1-20 of the pro- 
duct of the land, which, in times of great emergency, might be 
raised to 1-10. But this proposition was made as a substitute for a 
still more inequitable system: namely, the saddling of the lands of 
the commonalty with the whole tax, and altogetiier exempting the 
lands of the nobles and clergy. The public-spirited writer, who 
had occasion, in his character of engineer, to become personally 
acquainted with every part of France, speaks most feelingly of the 
hardships resulting from the land-tax(a) of those days. And there 
is no doubt, that the adoption of his plan at that time would have 
been a vast relief to the country. But it was disregarded. Why? 
Because every courtier had an interest to resist it: and this fihe 
country was left to flounder through its distresses. The conse- 
quence was, a heavier loss of population from famine, than from the 
sword, in the war of the Spanish succession. 

The difficulty and expense of collection, together with the abuses 
to which it is liable, are another objection to taxation in kind. The 
immense number of agents must open a fine field for peculation. 
The government may be imposed upon, in respect to the amount 
collected, upon the subsequent sale and disposal, in respect to the 
quantity damaged, as well as in the charges of storing, preservation 
and carriage. If the tax be farmed to contractors, the profits and 
expenses of numberless farmers and contractors must all fall upon 
the public. The prosecution of the farmers and contractors 
would require the active vigilance of administration. 'A gen- 
tleman of great fortune,' says Smith, ' who lived in the capital, 
would be in danger of sufiering much by the neglect, and more by the 
fraud, of his factors and agents, if the rents of an estate in a distant 
province were to be paid to him in this manner. The loss of the 
sovereign, from the abuse and depredation of his tax-gatherers, 
would necessarily be much greater.'"' 

Various other objections have been urged against taxation in 
kind, which it would be useless and tedious to enumerate. 1 shall 
only take the libertv of remarking the violent operation upon re- 
lative price, which must follow from so vast a quantity of produce 
being thrown upon the market by the agents of the public revenue, 
who are notoriously equally improvident as buyers and as sellers. 
The necessity of clearing the storehouses to make room lor the 
fresh crop, and tlie ever urgent demands upon the public purse, 
would oblige them to sell below the level, to which the price would 

* Wealth of Nations, book v. c. 2. art. I. 

(a) Taille: for the explanation of this tax, vide Wealth of Nations, book v. c. 
2. art. 2. T. 



480 ON CONSUMPTION. 



BOOK III, 



naturally be brought by the rent of the land, the wages of labour, 
and the interest of the capital, engaged in agriculture: and private 
dealers would be unable to maintain the competition. Such taxation 
not only takes from the cultivator a portion of his product, but pre- 
vents his turning the residue to good account. 



SECTION IV. 

Of the Territorial or Land-Tax of England. 

In the year 1692, which was four years after the happy revolu- 
tion, that placed the prince of Orange upon the British throne, a 
general valuation was made of the income of all the land in the 
country; and, upon that valuation, the land-tax continues to be 
levied to this day; so that the tax of four shillings in the pound, 
upon the rents of land, is a fifth of its rent in 1692, and not of the 
actual rent at the present day. 

It may easily be conceived how much this tax must operate to 
encourage improvements of the land. An estate that has been 
improved so as to double the rent, does not pay double the original 
tax; neither does it pay a less tax if it be suffered to fall into neglect 
and impoverishment; thus, it operates as a penalty upon negligence. 
1 o this fixation of the tax, many writers attribute the high state 
ot the cultivation of the land in England : and doubtless it mjy have 
done much to promote improvement. But, what would be thought 
ol a government that should say to a tradesman in a small way of busi- 
ness, " You are trading in a small way upon a small capital, and con- 
sequently pay very little in direct taxes. Borrow, and enlarge your 
capital, extend your dealings, and increase your profits as much as you 
can, and we will not charge you with any increase of taxes. Nay, fur- 
ther, when your heirs succeed to the business, and have still further 
extended it, they shall be assessed at precisely the same rate, and shall 
continue subject to the same taxes only." All this might be a vast 
encouragement to trade and manufacture; but would there be any 
equity in such a proceeding? and might they not advance without 
such assistance? Has not England herself presented the example 
ot a still more rapid improvement in commercial and manufacturing 
industry, without any such unjust partiality? A land-owner, by 
attention, economy, and intelligence, improves his annual income to 
the amount, say of 1000 dollars: if the state claim a fifth of this 
advance there will still be a bonus 800 dollars to stimulate and ^j 
reward his exertions. 

It would be easy to put cases, in which the tax, besoming by its 
tixation disproportionate to the means of the tax-payers and the 
condition of the soil, might be productive of as much mischief, as 
It has clone good in other instances: where it would operate to 
throw out of cultivation a class of land, that, by one cause or other, had 
become incompetent to pay the same ratio of taxation. We have 



CHAP. IX. ON CONSUMPTION. 481 

seen an example of this in Tuscany. There, a census or terrier was 
made in 1496, wherein the plains and vallies were rated very low, 
on account of the frequent floods and inundations, which prevented 
any regular and profitable cultivation; while the uplands, that were 
then the onl}^ cultivated spots, were rated very high. Since then, 
the torrents and inundations have been confined by drainage and 
embankment, and the plains reduced to fertility; their produce 
being comparatively exempt from tax, came to market cheaper than 
that of the uplands, which, consequently, were unable to maintain 
the competition, under the pressure of disproportionate taxation, 
and have gradually been abandoned and deserted.* Whereas, had 
the tax been adjusted to the change of circumstances, both might 
have been cultivated together. 

In speaking of a tax, peculiar to a particular nation, I have used 
it merely in illustration of general and universal principles. 



CHAPTER IX. 

OF NATIONAL DEBT. 

Section I. 

Of the Contracting Debt by National Authority, and of its 
general Effect. 

There is this grand distinction between an individual borrower 
and a borrowing government, that, in general, the former borrows 
capital for the purpose of beneficial employment, the latter for the 
purpose of barren consumption and expenditure. A nation bor- 
rows, either to satisfy an unlooked-for demand, or to meet an extra- 
ordinary emergency; to which ends, the loan may prove effectual 
or ineffectual: but, in either case, the whole sum borrowed is so 
much value consumed and lost, and the public revenue remains 
burthened with the interest upon it. 

Melon maintains, that a national debt is no more than a debt from 
the right hand to the left, which nowise enfeebles the body politic. 
But he is mistaken; the state is enfeebled, inasmuch as the capital 
lent to its government, having been destroyed in the consumption 
of it by the government, can no longer yield any body the profit, 
or in other words, the interest, it might earn, in the character of a 
productive means. Wherewith, then, is the government to pay the 
interest of its debt? Why, with a portion of the revenue arising 

* Forbonnois, Pri7icip€s d Observ. &c. torn. ii. p. 247. 
61 



482 ON CONSUMPTION. book hi. 

from some other source, which it must transfer from the tax-payer 
to the public creditor for the purpose. 

Before the act of borrowing, there will have been in existence 
two productive capitals, each of them yielding, or capable of yield- 
ing, revenue; that is to say, a capital about to be lent to government, 
and a capital whereon the future tax-payers derive that revenue, 
which is about to be applied in satisfaction of the interest upon the 
capita] lent. After the act of borrowing, there will remain but one 
of these capitals; viz. the latter of the two, whereof the revenue is 
thenceforward no longer at the disposal of its former possessors, 
the present tax-payers, since it must be taken in some form of tax- 
ation or other by the government, for the sake of providing the 
payment of interest to its creditors. The lender loses no part of 
his revenue: the only loser is the payer of taxes. 

People are apt to suJDpose, that, because national loans do not 
necessarily occasion any diminution of the national money or specie, 
therefore, they occasion, not a loss but merely a transfer, of national 
wealth. With a view to the more ready exposure of this fallacy, I 
have subjoined a S5moptical table, showing what becomes of the sum 
borrowed, and whence the public creditor's interest is satisfied.* 

When a government borrows, it either does or does not engage 
to repay the principal. In the latter case it grants what is called, 
a perpetual annuity. Redeemable loans are capable of infinite 
variety in the terms. The principal is contracted to be repaid, 
sometimes gradually, and in the way of lottery; sometimes by instal- 
ments payable together with the interest, sometimes in the way of 
increased interest, with condition to expire on the death of the 
lender; as in the case of tontines and life-annuities, whereof the 
latter determine on the death of the individual lender; whereas, in 
tontines, the full interest continues to be divided amongst the sur- 
vivors, until the whole of the lives have expired. 

Tontines and life-annuities are very improvident modes of bor- 
rowing; for the borrower remains throughout liable to the full rate 
of interest, although he annually repays a part of the principal. 
Besides, they savour of immorality; offering a premium to egotism, 
and a stimulus to the dilapidation of capital, by enabling the lender 
to consume both principal and interest, without fear of personal 
beggary. 

The governments best acquainted with the business of borrowing 
and lending have not, of late years at least, given any engagement 
to repay the principal of the loan. Thus, public creditors have no 
other way of altering the investment of their capital, except by 
selling their transferable security, which they can do with more or 
less advantage to themselves, according to the buyer's opinion of 
the solidity of the debtor government, that has granted the perpetual 
annuity.! Despotic governments have always found a great diffi- 

* Vide App. A. 

t In the next section it will be explained how an unredeemable debt may be 
extinguished by purchase at the market price. 



CHAP. IX. ON CONSUMPTION. 483 

culty in negotiating such loans. Where the sovereign is powerful 
enough to violate his contracts at pleasure, or' where there is a mere 
personal contract with the reigning monarch, with a risk of dis- 
avowal by the successor, lenders are loth to advance their money, 
without a near and definite period of payment. 

The appointment to posts and offices, under condition of an annual 
payment, or of deposite for which the government engages to pay 
interest, is a mode of borrowing in perpetuity, in whicli the loan is 
compulsory. When once this paltry expedient is resorted to, it 
requires very little ingenuity to find plausible grounds, for convert- 
ing almost every occupation, down to the dust-man and street-por- 
ter, into patent and saleable offices. 

Another mode of borrowing is, by the anticipation of revenue; 
by which is meant, the assignment by a government of revenues 
not yet due, with allowance in the nature of discount, the taking 
up money in advance from lenders, who charge a discount propor- 
tionate to the risk they run from the instability of the government 
and possible deficiency of the revenue. Engagements of this kind 
contracted by a government, and satisfied either out of the revenue 
when collected, or by the issue of fresh bills upon the public trea- 
sury, constitute what bears the uncouth English denomination of 
Jloati7ig deht; the consolidated debt being that, whereon the credi- 
tor can demand the interest only, and not the principal. 

National loans of every kind are attended with the universal dis- 
advantage, of withdrawing capital from productive employment, and 
diverting it into the channel of barren consumption; and, in coun- 
tries where the credit of the government is at a low ebb, with the 
further and particular disadvantage, of raising the interest of capital. 
Who can be expected to lend at 5 per cent to the farmer, the manu- 
facturer, or the merchant, while he can readily get an offer of 7 or 
8 per cent from the government? That class of revenue which has 
been called, profit of capital, is thereby advanced in its ratio, at the 
expense of the consumer: the consumption falls off, in consequence 
of the advance in the real price of products; tbe productive agency 
of the other sources of production are less in demand, and conse- 
quently worse paid; and the whole community is the sufferer, with 
the sole exception of the capitalist. 

The ability to borrow affords one main advantage to the state, 
namely, tiie power of apportioning the burthen entailed by a sudden 
emergency among a great number of successive years. In the pre- 
sent state of public affairs, and on the present scale of international 
warfare, no country could support the enormous expense from its 
ordinary annual revenue. The larger states pay in taxation nearly 
as much as they are able; for economy is by no means the order of 
the dav with them; and their ordinary expenditure seldom laila 
much short of the income. If the expenditure must be doubled to 
save the nation from ruin, borrowing is usually the only resource; 
unless it can make up its mind to violate all subsisting engagements, 
and be guilty of spoliation of its own subjects and foreigners too. 



484 ON CONSUiVix _ -^ON. 



BOOK III. 



The faculty of borrowing is a more powerful agent, than even o-un- 
powder; but probably the gross abuse that is made of it, will soon 
destroy its efficacy. 

Great pains have been taken, to find in the system of borrowing, 
as well as in taxation, some inherent advantage beyond that of sup- 
plying the public consumption. But a close examination will 
expose the hopelessness of such an attempt. 

It has been maintained, for instance, that the debentures and secu- 
rities, which form a national debt, become real and substantial 
values, existing within the community; that the capital, of which 
they are the evidence or representative, is so much positive wealth 
and must be reckoned as an item of the total substance of the nation.* 
But it is not so; a written contract or security is a mere evidence 
that such or such property belongs to such an individual. But wealth 
consists in the property itself, and not in the parchment, by which 
Its ownership is evidenced ; therefore a fortiori, a security is not 
even an evidence of wealth, where it does not represent an actual 
existing value, and when it operates as a mere power of attorney 
from the government to its creditor, enabling him to receive annually 
a specified portion of the revenue expected to be levied upon the tax- 
payers at large. Supposing the security to be cancelled, as it mio-ht 
be by a national bankruptcy, would there be any the least diminu- 
tion of wealth in the community? Undoubtedlv not. The only 
difference would be, that the revenue, which before went to the pub- 
lic creditor, would now be at the disposal of the tax-payer, from 
whom it used to be taken. j- ^ ? 

Those who tell us, that the annual circulation is increased by the 
whole amount of the annual disbursements of the government t 
forget that these disbursements are made out of the annual products 
and are a portion of the annual revenue, taken from the tax-payer' 
which would have been brought into the general circulation iust the 
same, although no such thing as national debt had existed The 
tax-payer would have spent what is now spent by the public credi- 

**oi ^ ril3,t IS 3.il, 

_ The sale or purchase of debentures or securities is not a produc- 
tive circulation, but a mere substitution of one public creditor in 
place of another. When these transfers degenerate into stock-job- 
bing, that IS to say, the making of a profit by the rise and fall of 
their price, they are productive of much mischief; in the first place 
by the unproductive employment on this object of the agent of cir' 
culation, money, which is an item of the national capital; and, in the 

* Comidtratwrnmrhs Vantages de V Exigence d^une Dette publinue, «. 8 

..nUn f"^''^''^^ "^"''\''^ '^"'^ «^«""'i«« d«es not invfst them with the 
properties of money, since they do not act in that capacity. But the usrof con 
vertible paper, as money, operates to create a positive a/ditiono the total na' 

GovernmentTebenfureL ''"^^ ^l^^^^ ^"bstantial item of ^capi a 

acr^tS eWerasTonfy''"' "'^"" "°"^^ "" ^''^^^ them, instead of 



CHAP. IX. ON CONSUMPTION. 4S5 

next, by procuring a gain to one person by the loss of another; 
which is the characteristic of all gaming. The occupation of the 
stock-jobber yields no new or useful product; consequently, having 
no product of his owa to give in exchange, he has no revenue to 
subsist upon, but what he contrives to make out of the unskilfulness 
or ill-fortune of gamesters like himself. 

A national debt has been said to bind the public creditors more 
firmly to the government, and make them its natural supporters by 
a sense of common interest; and so it does beyond all doubt. But, 
as this common interest may attach equally to a bad or a good gov- 
ernment, there is just as much chance of its being an injury as a bene- 
fit to a nation. If we look at England, we shall see a vast number 
of well-meaning persons, induced by this motive to uphold the 
abuses and misgovernment of a wretched administration. 

It has been further urged, that a national debt is an index of the 
public opinion, respecting the degree of credit which the government 
deserves, and operates as a motive to its good conduct, and endea- 
vours to preserve the public opinion, of which such a debt furnishes 
the index. This can not be admitted without some quahfication. 
The good conduct of government in the eyes of the public creditors, 
consists in the regular payment of their own dividends; but in the 
eyes of the tax-payers, it consists in spending as little as possible. 
The market-price of stock does, indeed, furnish a tolerable index of 
the former kind of good conduct, but not of the latter. Perhaps it 
would be no exaggeration to say, that the punctual payments of the 
dividends, instead of being a sign of good, is in numberless instances 
a cloak to bad, government; and, in some countries, a boon for the 
toleration of frequent and glaring abuses. 

Another argument in favour of national debt is, that it affords a 
prompt investment to capital, which can find no ready and profit- 
able employment, and thus must, at any rate, prevent its emigration. 
If it do, so much the worse: it is a bait to tempt capital towards its 
destruction, leaving the nation burthened with the annual interest, 
which government must provide. It is far better that the capital 
should emigrate, as it would probably return sooner or later; and 
then its interest for the mean time will be chargeable to foreigners. 
A national debt of moderate amount, the capital of which should 
have been well and judiciously expended in useful works, might 
indeed be attended with the advantage of providing an investment 
for minute portions of capital, in the hands of persons incapable of 
turning them to account, who would probably keep them locked up, 
or spend them by driblets, but for the convenience of such an invest- 
ment. This is perhaps the sole benefit of a national debt; and even 
this is attended with some danger; inasmuch as it enal)les a govern- 
ment to squander the national savings. For, unless the principal be 
spent upon objects of permanent public benefit, as on roads, canals, 
or the like, it were better for the public, that the capital should 
remain inactive, or concealed; since, if the public lost the use of it, 
at least it would not have to pay the interest. 



486 ON CONSUMPTION. book iii. 

Thus, it may be expedient to borrow, when capital must be spent 
by a government, having nothing but the usufruct at its command; 
but we are not to imagine, that, by the act of borrowing, the public 
prosperity can be advanced. The borrower, whether a sovereign, 
or an individual, incurs an annual charge upon his revenue, besides 
impoverishing himself to the full amount of the principal, if it be 
consumed; and nations never borrow but with a view to consume 
outright. 



Section II. 

Of public Credit^ its Basis, and the Circumstances that endan- 
ger its Solidity. 

Public ct-edit is the confidence of individuals in the engagements 
of the ruling power, or government. This credit is at the extreme 
point of elevation, when the public creditor gets no higher interest, 
than he would by lending on the best private securities; which is a 
clear proof, that the lenders require no premium of insurance to 
cover the extra risk they incur, and that in their estimation there is 
no such extra risk. Public credit never reaches this elevation, ex- 
cept where the government is so constituted, as to find great difficulty 
in breaking its engagements, and where, moreover, its resources are 
known to be equal to its wants; for which latter reason, public credit 
is never very high, unless where the financial accounts of the nation 
are subject to general publicity. 

Where the public authority is vested in a single individual, it is 
next to impossible, that public credit should be very extensive; for 
there is no security, beyond the pleasure and good faith of the 
monarch. When the authority resides in the people, or its repre- 
sentatives, there is the further security of a personal interest in the 
■people themselves, who are creditors in their individual, and debtors 
in their aggregate, character; and therefore, can not receive in the 
former, without paying in the latter. This circumstance alone 
would lead us to presume, that now, when great undertakings are 
so costly as to be effected by borrowing alone, representative gov- 
ernments will acquire a marked preponderance in the scale of 
national power, simply on account of their superior financial 
resources, without reference to any other circumstance. 

In one light, the obligations of government inspire more confi- 
dence than those of individuals, that is to say, by the greater solidity 
of its resources. The resources of the most responsible individual 
may fail suddenly and totally, or at least to such an extent, as to 
disable him from performing his engagements. 

Numerous commercial failures, political or natural calamities, 
litigation, fraud or violence, may ruin him entirely; but the sup- 
plies of a government are derived from such various quarters, that 
the individual calamities of its subjects can operate but partially upon 



CHAP. IX. ON CONSUMPTION. 487 

the revenue of the state. There is also another thing, that facilitates 
the horrowing of government even more than the credit it is fairly 
entitled to; and that is, the great facility of transfer presented to the 
stockholder. Public creditors always reckon upon the possibility 
of withdrawing by the sale of their debentures, before the occur- 
rence of embarrassment or bankruptcy; and, even where they con- 
template such a risk, generally consider some advance of the rate of 
interest a sufficient premium of insurance against it. 

Moreover, it is observable, that the sentiments of lenders and 
indeed of mankind upon all occasions, are more powerfully operated 
upon by the impressions of the moment, than by any other motive; 
experience of the past must be very recent, and the prospect of the 
future very near, to have any sensible effect. The monstrous breach 
of faith on the part of the French government in 1721, in regard to 
its paper money and the Mississippi share-holders, did not prevent 
the ready negotiation of a loan of 200,000,000 liv. in 1759; nor did 
the bankrupt measures of the Abbe Terrai in 1772, prevent the 
negotiation of fresh loans in 1778 and every subsequent year. 

In other points of view, the credit of individuals is better founded 
than that of the government. There is no compulsory process 
against the latter, for the breach of its engagements; nor do govern- 
ments ever husband the national resources with nearly the care and 
attention of individuals. Besides, in the event of external or internal 
subversion, individuals may withdraw their property from the wreck 
much better than governments can. 

Public credit affords such facilities to public prodigality, that 
many political writers have regarded it as fatal to national pros- 
perity. For, say they, when governments feel themselves strong in 
the ability to borrow, they are too apt to intermeddle in every 
political arrangement, and to conceive gigantic projects, that lead 
sometimes to disgrace, sometimes to glory, but always to a state of 
financial exhaustion; to make war themselves, and stir up others 
to do the like; to subsidize every mercenary agent, and deal in the 
blood and the consciences of mankind; making capital, which should 
be the fruit of industry and virtue, the prize of ambition, pride, and 
wickedness. 

A nation, which has the power to borrow, and yet is in a state of 
political feebleness, will be exposed to the requisitions of its more 
powerful neighbours. It must subsidize them in its defence; must 
purchase peace; must pay for the toleration of its independence, 
which it generally loses after all; or perhaps must lend, with the 
certain prospect of never being repaid. 

These are by no means hypothetical cases: but the reader is left 
to make the application himself. 

By the establishment of sinking funds, well ordered governments 
have found means to extinguish and discharge their unredeemable 
debt. The constant operation of this contrivance contributes more 
than any thing else to the consolidation of public credit. The mode 
of proceeding is simply this: 



488 ON CONSUMPTION. book iii. 

Suppose that the state borrows 100 millions of dollars at an in- 
terest of 5 per cent; to pay that interest, it must appropriate a portion 
of the national revenue to the amount of 5 millions of dollars. For 
this purpose, it usually imposes a tax calculated to produce this 
sum annually. If the tax be made to produce somewhat more, say 
5,462,400 dollars, and the surplus of 462,400 dollars be thrown into 
a particular fund, and laid out annually, in the purchase of govern- 
ment debentures to that amount in the market, and if, moreover, in 
addition to this surplus, the interest likewise upon the debt thus 
extinguished, be annually employed in such purchases, the whole 
principal debt will be extinguished at the end of fifty years. This 
is the mode in which a sinking-fund operates. The efficacy of this 
expedient depends upon the progressive power of compound in- 
terest; that is to say, the gradual augmentation of the interest of 
capital, by the addition of interest upon the arrears of interest, 
reckoned from certain stated periods. 

It is obvious, that, by an annual instalment of not more than 10 
per cent upon its own interest, the principal of a debt bearing an 
interest of 5 per cent, may be extinguished in less than 50 years. 
However, the sale of the debentures being voluntary, if the holders 
will not sell at par, that is to say, at 20 years purchase, the redemp- 
tion, in this way, will take somewhat longer time; but this very 
state of the market will be a convincing proof of the high ratio of 
national credit. On the other hand, if the credit decline, so that the 
same sum will purchase a larger amount of debentures, the extinc- 
tion of the debt will be effected in a shorter period. So that the 
lower public credit falls, the more powerful is the operation of a 
sinking-fund to revive it; and that fund grows less efficient, exactly 
in proportion as it becomes less requisite. 

To the establishment of such a fund, has the long-continued public 
credit of Great Britain been attributed, and her ability still to go on 
borrowing, in spite of a debt of more than 800 millions sterling.(l) 

(1) In a note, here subjoined, the author stated the amount of the British 
national debt, in the year 1815, on the authority of a speech made in parliament 
in February, of that year, by the chancellor of the exchequer, Mr. Vansittart. 
We now have it in our power, in place of the note in question, to furnish the 
reader with an exact statement of the British national debt, from it commence- 
ment, at the revolution of 1688, to the 5th of January, 1832. The abstract we 
give is extracted from the Tables to Part II. of " Pebrer on the Taxation, Debt, 
Capital, Resources, &c. of the whole British Empire," a work which we 
before had occasion to refer to, and of the highest statistical authority. 

Pou7ids sterling. 
National debt at the revolution, 1688, - - - 664,263 

Increase during the reign of William and Mary, - 15,730,439 

Debt at accession of Anne, 1702, .... 16,394,702 
Increase during reign of Anne, - - . . 37,750,661 

Debt at accession of George I., 1714, - - . - 54,145,363 
Decrease during reign of George I., - - . - 2,053,128 



CHAP. IX. ON CONSUMPTION. 489 

And doubtless this it is, that has made Smith declare sinking-funds, 
which were contrived expressly to reduce national debt, tlie main 
instruments of their increase. Had not governments the happy 
knack of abusing resources of every kind, they would soon grow 
too rich and powerful. 

A sinking-fund is a complete delusion, whenever a government 
continues borrowing on one hand, as mucli as it redeems on the 
other; and a fortiori., when it borrows more tlian it redeems, as 
England has constantly done, since the year 1793 to the present 
time. Wheucesoever the amount of the sinking-fund be derived, 
whether it be merely the product of a fresh tax, or that product, 
augmented by the interest on the extinguished debt, if the govern- 
ment borrow a million for every million of debt that it pays off, it 
creates an annual charge of precisely the same amount as that ex- 
tinguished: it is precisely the same thing, as lending to itself the 
million devoted to the purpose of redemption. Indeed, the latter 
course would save the expense of the opei-ation. This position has 
been fully established in an excellent work, by professor Hamilton,* 
which is quite conclusive upon the subject. The enormous burthens 

* On the National Debt of Great Britain. 8vo., Edinburgh, 1813. 

Debt at accession of George II., 1727, - - - 52,092,235 
Decrease during the peace, ... - - 5,137,612 

Debt at commencement of Spanish war, 1731), - - 4G,95 i,G23 
Increase during the war, - 31, 338,089 

Debt at end of Spanish war, 1748, ... - 78,293,312 
Decrease during the peace, . . - - - 3,721,472 

Debt at commencement of war, 1755, - - - 74,571,840 
Increase during the war, 72,111,004 

Debt at conclusion of the peace, 1762, - - - 146,682,844 
Decrease during the peace, 10,739,793 

Debt at commencement of American war, 1776, - 135,943,051 
Increase during the war, 102,541,819 

Debt at conclusion of American war, 1783, - - 238,484,870 
Decrease during the peace, 4,751,261 

Debt at commencement of French revolutionary war, 1793, 233,733,609 
Increase during the war, 295,105,668 

Debt at peace of Amiens, 1st February, 1801, - - 528,839,277 
Increase during the second war, ... - 335,983,164 

Debt at peace of Paris, 1st Fel)iuary, 1816, - - 864,822,441 
Decrease since the peace, 82,155,207 

Debt on 5th January, 1832, £782,667,234 

Equal to 375,680,272,320 dollars. — 

American Lditor. 

62 



490 ON CONSUMPTION. book iii. 

of the people of England, the scandalous abuse its government has 
made of the power of borrowing, and her substitution of paper-mo- 
ney in place of specie, will have produced some benefit at least; 
inasmuch as they have assisted the solution of many problems, 
highly interesting to the happiness of nations, and given warning to 
all future generations, to beware of the like excesses. 

It must be evident, that the grand requisite to the efficiency of 
a sinking-fund is, the punctual and inviolable application of the sums 
appropriated to the purpose of redemption. Yet this has never been 
rigidly adhered to, even in England, where consistency and good 
faith to the creditors are a point of honour with the government. 
So that English writers- put no faith in the extinction of the debt 
by the operation of the sinking-fund: nay. Smith makes no scruple 
of declaring, that national debts have never been extinguished ex- 
cept by national bankruptcy. 

It has been sometimes a matter of speculation, to inquire into the 
effect of a national bankruptcy upon the relative condition of indi- 
viduals, and the internal economy of the nation. In ordinary cases, 
when a government commits an act of bankruptcy, it adds to the 
revenues ^of the tax-payers the whole amount that it discontinues 
paying to the public creditors. — Nay, it goes somewhat further: for 
it remits likewise the charges of collection and management of the 
revenue and the debt. A nation burthened with 100 millions of 
annual interest on its debt, whereon the charges above mentioned 
should amount to 30 per cent* more, might by a bankruptcy remit 
to the tax-payers 130 millions, while it stript its creditors of 100 
millions only. 

In England the effect would be more complicated; because she 
does not pay the dividends on her debt wholly out of the annual 
proceeds of taxation; at least, not at the moment of my writing; but 
annually borrows a sum nearly equal to the interest of her debtt 
Were she to commit an act of bankruptcy, the annual loans of 40 
millions sterling, more or less, would be withdrawal from unproduc- 
tive consumption by the public creditors, and be ajjplicable to the 
purposes of reproductive consumption: for it may fairly be suppos- 
ed, that the capitalists who accumulate and lend to the state, would 
look out for some profitable investment. In this point of view, the 
operation would tend A^astly to the increase of the national capital 
and revenue: but the execution would be attended with very disas- 
trous immediate consequences: for this annual amount of 40 mil- 
lions would be withdrawn from the class of consumers, who have 
nd other means of subsistence, and would be utterly unable to inake 

* In England and the United States they are not nearly so high in proportion: 
but the ratio is even higher in some states that shall be nameless, 

f Colquhoun, Wealth, Power, and Resources of the British Empire, 4to. Lon- 
don, 1814. Stokes, Revenue and Expenditure of Great Britain, London, 1815. 
Should a continuance of peace enable her to square her income with her annual 
expenditure, inclusive of the interest on her debt, it would still afford no relief, 
but merely arrest the further progress of the evil. 



CHAP. IX. ON CONSUMPTION. 491 

good their losses in any other way, for want both of personal indus- 
try, and of the command of capital. 

A bankruptcy would probably obviate the necessity of fresh 
loans: but would not release an atom of tlie former taxation, where 
the interest of the debt is habitually paid, not with the proceeds of 
taxation, but with new loans. Thus, the burthens of the people 
would not be alleviated,* nor tlie charges of production reduced: 
consequently there would be no sensible reduction in the price of 
commodities; nor would British products find a readier market 
either at home or abroad. 

The classes liable to taxation would be diminished in numerical 
strength, by the whole of the suppressed stockholders; and taxation 
less productive, although not lower in ratio. The 40 millions of 
revenue, withdrawn from the public creditors, would pay taxes only 
upon the annual profit or revenue, they might yield in the character 
of productive capital. The ruin of the public creditors would be 
attended with abundance of collateral distress; with private failures 
and insolvency without end; with the loss of employment to all 
their tradesmen and servants, and the utter destitution of all their 
dependents. 

On the other hand, if she persevere in borrowing to pay the inter- 
ests of the former loans, that interest and with it taxation also, must 
go on increasing to infinity. It is impossible to avoid a precipice, 
when one follows a road that leads nowhere else. 

The potentates of Asia, and all sovereigns, who have no hopes of 
establishing a credit, have recourse to the accumulation of treasure. 
Treasure is the reserve of past, whereas a loan is the anticipation of 
future revenue. They are both serviceable expedients in case of 
emergency. 

A treasure does not always contribute to the political security of 
its possessors. It rather invites attack, and very seldom is faithfully 
applied to the purpose for which it was destined. The accumula- 
tion of Charles V". of France fell into the hands of liis brother, the 
duke of Anjou; those which pope Paul II. destined to oppose the 
Turkish arms, and drive them out of Europe, supplied the extrava- 
gancies of Sixtus IV., and his nephews. The treasures amassed by 
Henry IV., for tlije humiliation of the house of Austria, were lavish- 
ed upon the favourites of the queen mother; and, at a later period, 
we have seen the political power of Prussia brought into imminent 
hazard by those very savings, which were destined by Frederick 
III. to its consolidation. 

The command of a large sum is a dangerous temptation to a 
national administration. Thougn accumulated at their expense, the 
people rarely, if ever profit by it: yet in point of fact, all value, 
and consequently, all wealtl»> originates with the people. 

* Economy in the national expenditure is the only thing that can mitigate the 
pressure of taxation upon the British nation; yet were economy enforced, how 
is that system of corruption to be upheld, through which the interest of the min- 
ister of the day regularly prevails over that of the nationi 



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